Answer: Like most answers to questions regarding long-term disability insurance the answer is predicated on the terms and conditions of the long-term disability insurance policy in question.
Foreign residency limitations will serve to either deny coverage and preclude payment of long-term disability benefits if the insured resides outside of the U.S. for a specified period of time, often six (6) months or more, or it will limit payments to a specified period of time, often no more than 12 months, if the insured resides outside of the U.S.
Most policies are silent regarding limitations on residency requirements, and the disability insurer will not deny or terminate a claim solely on the basis that the insured resides outside of the U.S. However, it is not uncommon to find a foreign residency limitation in many individual and group long-term disability policies. The existence of a foreign residency limitation in a policy will primarily benefit the disability insurance company. In fact, I can’t think of many benefits to the insured except that maybe treating physician support, to the satisfaction of the insurance company, may be easier to establish if claimant resides in the U.S. However, it is primarily a way for the disability insurer to ensure that it will always have the ability to easily manage the claim, interact with treating physicians without the existence of a language barrier, and of course to monitor the claimant – it can be difficult to conduct frequent surveillance of the insured when they reside in China or Europe.
If a disability claim is challenged on the basis of a foreign residency limitation it often involves the insurance company’s perception that the insured is spending more time in a foreign country than in the U.S. To wit, that the insured is not just spending a few weeks or months in their Bahamas timeshare, but rather, established residency and domicile there. Indeed, it is a question of fact and one can expect to have to produce substantial evidence establishing that they continue to reside within the U.S., e.g., copies of U.S. passport, including tourist visas; utility bills; federal and state income tax returns; property tax statements, etc…
If you have a concern regarding a foreign residency limitation in your individual or group long-term disability insurance contract, please do not hesitate to contact us. The consultation is free.