Life insurance is as necessary as other basic requirements of life. Every person in India has at least one life insurance plan in his investment portfolio. It has become very common that NRIs choose to buy life insurance cover in India instead of buying it abroad.
You may wonder how this entire thing could work! It is true that Non Resident Indians are permitted to buy life cover in their home country and insurers can also issue life cover plans to NRI clients. In fact, policies can be purchased in both Indian and foreign currencies. There are insurance companies in India which provide life insurance for NRIs.
Why NRIs Choose to Buy Life Insurance in India?
There could be several reasons of NRIs buying life insurance plans in India though they do not live in India. Here are a few reasons why Non Resident Indians choose to have life insurance plan in India:
- Those who have temporarily moved to foreign due to their job or higher studies choose to buy life insurance policies in India.
- Since life insurance for NRIs can be easily bought in India, those who have plans to resettle in India after certain period of time choose to buy insurance beforehand.
- Those NRIs, who have their parents and other responsibilities in India, they also choose to buy insurance from Indian insurers.
- Those NRIs, who have their nominees in India, also choose to buy life insurance cover in India. This would make easier for the nominee to claim the insurance.
How to Buy Life Insurance for NRIs in India?
NRIs can buy NRI life cover plan from Indian insurer through written conversation with the insurer from abroad. In that case, you may need to spend some extra money to complete this process of purchasing the policy. You might need to pay on your own for your health screening and spend some additional amount to send the original health reports and other original attested documents to the insurance company from abroad. If you would buy the insurance while you are in India, you do not have to pay for your health screening because it would be covered by the policy itself. However, many insurance companies may insist on your presence while buying the life insurance. It will be less complicated if you plan to buy insurance during your visit to India.
Things to Know before Purchasing Life Insurance for NRIs
It is advisable to know about the insurers and their policies for NRI clients in depth before you choose to buy life cover plan from abroad.
- Types of Life Insurance Plans in India – There are several kinds of life cover plans available in India. Life insurance for NRIs is no different from that of residents of India. NRIs can also avail all types of life insurance cover. You may choose to buy traditional life cover policy, Unit Linked Insurance Plans or term insurance plans.
- Premium Payment of NRI Life Cover Plan–It is up to the insurance company whether or not they will accept foreign currency. Some insurers may choose to take Indian currency only. If your policy is denominated in foreign currency you may pay your premiums in foreign currency from overseas or else via your FCNR/NRE account. If the insurer accepts Indian currency only, you may pay premiums via your NRO bank account.
- Premium Rate – It is often thought that life insurance for NRIs costs higher premiums. But this is just a myth. Premiums to be contributed towards life insurance cover are same for both Indian residents and non resident Indians. However, if the NRI is living in a country where there is higher risk of life, the premium can get higher for him.
- Life Coverage – Life insurance for NRIs may allow limited coverage. If the health screening of the policy proposer is done in foreign, higher sum assurance may not be possible for the NRI. On the contrary if the medical screening is held during your visit to India, higher sum can be assured to avail greater life coverage.
- Maturity and Death Benefits of Life Insurance for NRIs–Maturity and death benefits are repatriable provided the premiums are paid in foreign currency. The death benefit of life insurance for NRIs is payable, even if the death of the policy owner takes place outside India. However, if the premiums for the entire policy term are paid in Indian currency, these benefits are payable but not repatriable. Besides, if the insurance plan is bought before leaving the country, that, too, will not affect the maturity and death benefits. The portion of premium paid in foreign currency will be repatriated.
- Tax Benefits – In India NRIs can also avail similar tax benefits. That means, an NRI can also save up to ₹1lakh and 50 thousand on life insurance under the norms of Sec 80C.
Few Important Tips Regarding life insurance for NRIs
- It is true that life insurance premiums can be paid in foreign currency in India from abroad but many insurance companies may not allow you to pay in foreign currency to avoid the currency risk.
- Even if the insurance company denominates your insurance policy into foreign currency, premium rates may vary to deal with the currency risk.
- If the insurance is denominated in foreign currency, you either need to pay premiums directly in foreign currency or via NRE account.
- If your insurance plan premiums can only be paid in Indian currency then you have to make payments via NRO accounts.
- Regarding taxation, check for the tax rules in the country where you presently reside. You may or may not receive any tax benefit abroad.
- Regarding insurance claim, it is recommended to go through the actual claim procedure of life insurance for NRIs to avoid any confusion. Here is a list of documents that are usually needed to claim NRI life insurance:
- Original certificate of the insurance policy.
- Original identity proof of the policy claimant.
- Insurance holder’s original death certificate – Attestation of the death certificate by high commission overseas or by Indian Embassy is must.
However, if the demise of the policy owner occurs during his visit in India, attested death certificate may not be required. This may vary from one insurer to another.