Financial protection for Americans in Europe

For overseas Americans, life insurance planning can be a confusing matter to consider. Even

though it is a bedrock to any sound financial plan, there are major differences with life

insurance in Europe versus the United States.

The first major difference is with the technical definition. In the United States, a life

insurance policy must provide a significant death benefit corridor over any underlying cash

value in order for it to qualify as being life insurance. However, in Europe, life insurance can

simply be a wrapper around an investment or cash value, with just a return of premium or a

small additional payment in the event of death. In both Europe and in America, life

insurance normally is granted special tax advantaged treatment.

A second major difference is the cost of death benefit protection. The United States has a

much larger and more competitive market which helps drive down costs and spurs

innovative product designs. For those seeking death benefit protection, they may find the

United States to be their best option. Also, due to IRS PFIC rules and restrictions from

European institutions on doing business with US persons, these could be reasons to consider

a life insurance purchase in the United States. Please note, countries heavily regulate their

life insurance markets so any consideration of a US policy would require all business to be

conducted in the United States and vice versa.

So no matter if you are a young couple just starting out or older, life insurance becomes an

important part of your financial planning. It can help in both protecting against dying too

soon or later for estate planning in helping direct benefits to beneficiaries more efficiently.

James McEvoy, CLU, ChFC

Cross Border Planning