Can an illegal immigrant buy life insurance?

Life Insurance Companies Use Actuarial Science To Determine Acceptable Risks

Life insurance underwriting uses actuarial science to determine what people make good risks and who may not be such a good risk to insure.

There are several factors that go into that determination, and those factors are based upon actual results of study and life situations.

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–Early History of Insurance Concepts

Life insurance coverage, where a contract is issued promising to pay a certain sum at the point of death of an insured has been a viable practice since ancient times.

Early concepts of life insurance benefit, called burial clubs, were known to be in existence during the Greek and Roman times when guilds were formed to help the families of fallen soldiers during battle.

Over time various forms of insurance in the guise of cargo insurance for shipping, forms of life insurance if sailors were lost at sea and other similar forms were devised, but the risk dispersion in these types of insurance was not usually adequate for the plans to last or gain any public popularity.

In 1782, Professor Edward Wigglesworth of Harvard University presented the very first mortality table in America to the American Academy of Arts and Sciences. This was a fist step toward the scientific measurement of how many people live to certain ages.

A mortality table became a scientific measure of the probability of people, male and female living to certain ages, and they became the measuring rod for the establishment of premium rates for life insurance.

The very first life insurance companies in America was a branch of the English company, the Pelican Life Insurance Company of London.

However, there was a distrust of foreign influences and the time lag across the Atlantic was a problem. So laws were passed limiting foreign companies having influence in the United States.

The early part of the 1800’s was a good time for the formation of businesses, and life insurance companies began to be one of those new industries.

In 1809, the very first life insurance company was domiciled in the United States. It was the Pennsylvania Company was formed, and others followed suit.

The growth of life insurance companies continued into the mid-1800’s when many of the major companies that are still in business and constitute a major portion of the business still are going strong.

–The Development of Underwriting Standards To Develop More Control of Risk

As life insurance companies gained prominence and strength, and the companies began to learn how to sell it in larger numbers, the back end of designing the policies became more sophisticated.

One of the basic rules that applied was the law of large numbers. This rule states that the more numbers you have any statistical study, the more likely you are to achieve the result for which you are looking.

In other words, when you are predicting death rates with mortality tables, the more people you put into the sample, the less financial risk there is of making a mistake in death rate estimations.

–Mortality, Interest and Expense

During this time between the early 1800’s and the mid to latter part of the century, the actuarial and underwriting formulas became more sophisticated.

The hallmark formula for calculating premiums and reserves are based upon the treatment of mortality, interest, and expense.

• Mortality – Mortality is the part of the formula that concerns us most when we ask the question about whether or not illegal aliens can purchase life insurance.
• Interest – The earnings of premium money over time to reach the present value of required and excess reserves.
• Expense – The expenses of selling, the administration, and maintenance of a policy during its lifetime.

–How Does This Affect An Illegal Immigrant Purchasing Life Insurance?

The mortality part of the equation has several sub-categories which are life events that can affect how long a person will live. The ethic of a society in which a person lives has a great deal to do with exposure to hazards that could affect mortality.

The society in which a person lives or lived can have a great deal to do with how an underwriter who will pass judgment on and individual’s insurability looks at a risk.

If a person is of a foreigner who comes from a war zone or a country where tuberculosis and other diseases are rampant, it will most certainly affect that person’s insurability.

Overall mortality is affected by a person’s exposure to hazards, their criminal background, whether they use tobacco or drugs, and their past medical history.

People who arrive in the United States may have brought much of these factor with them when they arrive.

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Can An Illegal Immigrant Purchase Life Insurance?

The answer to the question is yes and no.

–Social Security Card

The basic problem for an illegal immigrant is that to purchase life insurance, the individual will need to have a valid social security number.

An individual who is not a citizen of the United States can obtain a social security number of they are legally allowed to be in the US. For example, a person that is in the United States on a work visa or some other legal means could get a social security number.

Some life insurance companies will allow coverage to be written and issued if a person has a green card, or is on their way to becoming a citizen. This practice can vary from company to company.

Of course, an illegal immigrant could try and use a fake social security card, but that might not always work as it is easy for the insurance company to check and see if it is a valid number.

–Fraud Does Not Pay

It is very important for the life insurance company to be able to positively identify anyone who wished to purchase life insurance from them. There are cases where people fake a death and attempt to collect, which of course is illegal.

The two-year incontestable clause, where no claim has to be paid if the life insurance company is lied to in any manner occurs.

You can be sure that life insurance company underwriters are currently being very cautious about illegal people who apply for life insurance.

–Buy Life Insurance in another Country

One solution for an illegal immigrant who is living in the United States is to go back to his or her home country and purchase life insurance there.

The Bottom Line

The fact that a person is illegal makes him or her a felon. No upstanding life insurance company is going to issue a policy in good standing to a person who is purposely currently breaking the law.

If a policy does get issued and illegal immigrant dies withing two years, the company could possibly deny the claim under the incontestable clause in the policy.

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