Domestic vs. Foreign Carriers

A foreign insurance company provides a greater benefit to policyholders vis a vis a Domestic carrier.

Domestic life policies may be sold and transferred but foreign policies may not be sold, assigned, pledged or otherwise transferred without the Insurer’s written consent and each policy will contain a prohibition to that effect.

Insurance can be bought from domestic and/or foreign insurance companies. US law requires insurance contracts to adhere to the Internal Revenue Code “IRC” and does not limit the purchase of insurance products strictly to US carriers. Relevant sections of the IRC that apply to insurance are:

  • §7702 – life insurance
  • §72 – annuities
  • §817(h) – diversification
  • §953(d) – corporate tax status

In general, if the policy adheres to the IRC, it can be US compliant.

Domestic Insurance:

  • State regulated with oversight by local insurance commissioner
  • Access to state guarantee funds
  • Can transact and negotiate contracts in State
  • Limited investment choices
  • Higher overall costs
  • Access via brokers or intermediaries

Foreign Insurance:

  • Regulated by country of domicile financial regulator
  • Higher initial cash surrender values with lower cancellation fees
  • More flexible investment options
  • Direct access to the insurance company for lower operating costs
  • Direct access to reinsurance