Is NRI life insurance a viable proposition? If you are an NRI (non-resident Indian), then should you consider purchasing life insurance in India? Many NRIs staying abroad often feel the need to deploy investments in life insurance policies in their home country.
The FEMA (Foreign Exchange Management Act) has also allowed investments in life insurance for PIOs (persons of Indian origin) and NRIs (non-resident Indians). Here are a few pointers regarding why you should consider life insurance investments in the country, along with some vital aspects concerning the same.
Buying Life Insurance In India- Why It Is Beneficial For NRIs
Here are some reasons why you should consider purchasing NRI life insurance:
- Securing Your Family Members- Term insurance for NRIs in India will naturally work as a safety net for your family in the future. Life is uncertain, and in the case of your unfortunate demise in your working years, the life insurance policy will pay a sum assured to your nominees, which can be used to take care of their monthly living costs, debt repayment, and future financial objectives.
- Possible Cost Savings- At times, NRI life insurance in India may be cheaper in comparison to policies in their countries of residence.
- Tax Benefits- NRIs who earn income in India can enjoy suitable tax deductions under Section 80C from the same (on their premium payments). The sum assured paid to the nominees in a death claim will be tax-exempted under Section 10 (10D) in the hands of your nominees. At the same time, if the life insurance policy has any other maturity benefits, then it may also be tax-exempted, subject to specific terms and conditions.
Now that you know of a few reasons why you should consider buying life insurance in India, here are some other aspects that you should keep in mind.
NRIs Buying Life Insurance In India- Things Worth Noting
Here are a few aspects that you should carefully note if you are an NRI who is considering life insurance purchases in your home country.
- NRIs and PIOs can purchase life insurance in their home country, irrespective of their citizenship status
- You can purchase life insurance in India without being physically present. However, if you are abroad, then you should send your medical examination reports to the insurance company in India at your own expense. You will have to cover the cost of the medical check-up in this case.
- If you purchase the life insurance policy during your visit to India, then you can get the medical test done at the insurance company’s expense. This will help you save more money.
- You can pay your life insurance policy premiums through settlement payments via foreign currency, NRE/FCNR bank accounts, and NRO (non-resident ordinary) bank accounts.
- Check the currency in which the insurer issues your policy since it may be issued in your resident country’s currency or INR. If the policy is in foreign currency, then you will have to pay premiums via the NRE/FCNR account in India. Yet, if the policy is issued in Indian rupees, then premiums may be paid via NRO accounts.
- Premiums are usually similar for both NRIs and residents of India while buying life insurance. However, if the NRI stays in a country with more life risks, then the premium amount may be higher. Countries that are vulnerable towards military or civil issues, political instability, and other threats may be labelled high-risk nations. Hence, NRIs staying in these countries will naturally have to pay a higher premium amount.
- The death claim or maturity benefit is only transferable to the resident nation only when the amount is the same as the premium paid in foreign currency. The premium amount paid in Indian rupees is not transferable. The proceeds cannot be transferred if the policyholder has paid the whole premium in Indian rupees via the NRO account. Suppose the policy is taken prior to becoming an NRI. In that case, the transferable proceeds will be equivalent to the premium that is paid in foreign currency out of the whole premium amount paid.
- NRIs may choose policy tenures between 6 months and 25 years. There are whole-life insurance policies available as well. NRIs should have a minimum age of 18 and a maximum age of 55-65, depending on the insurance company’s policies.
- You should also furnish a few documents while purchasing term insurance as an NRI, including the application form, income and age proof, copies of the back and front of the passport of the applicant, copies of medical records, residence proof, and the FACTA (Foreign Account Tax Compliance Act) form.
You should consider the coverage amount with care while purchasing life insurance in India. Make sure that the insurance payout is sufficient to take care of your family’s needs in the future, even when you are not around.