Term Insurance Tips for NRI in India
Due to attractive premium rates and the option to receive comprehensive coverage with the help of different riders, term insurance is emerging as the favourite investment option amongst Indians. The basic idea of a term plan is that the nominee of the policyholder will receive the death benefit in case of the insured’s unfortunate demise in mid of the policy tenure. In case the insured outlives her/his policy tenure, nothing will be paid by the company.
This basic idea holds true for everyone, whether they are Indian residents or Non-resident Indians (NRI). As an NRI, you may have already bought a term insurance or would have been looking for one that suits your requirements. Below enlisted are some questions with their answers that may help you shortlist the best term insurance for NRIs:
1.Does an NRI individual have the option to term insurance in India?
Yes, NRIs, as well as any individual with Indian origin, is allowed to buy a term plan in India.
2.Does the NRI individual have to be present in India while buying a term plan?
No, the NRIs have the option to buy a term plan from overseas following a written communication with the insurance providers in India. However, there may be certain additional costs like when you undergo medical tests, you would have to send the medical reports to the insurer in India. Also, you may have to bear the cost of these medical tests all by yourself depending upon the insurance company you choose.
3.How can NRI individuals pay their premiums?
Companies providing term insurance for NRIs accept payments in several modes including:
- Remittance in foreign currency
- FCNR/NRE bank account
- NRO bank account
Furthermore, insurance companies have the option to issue NRI term insurance policies denomination either in Indian rupees or foreign currency. If the term plan for NRIs has been denominated in foreign currency, the insurance seekers can pay their premiums in foreign currency through their NRE or FCNR accounts.
In cases, where term insurance for NRIs is issued in Indian rupees, the insurance holders can use the funds held in their NRO accounts to pay the premium amount. However, it should be understood that not all insurance providers offer term insurance for NRIs in foreign currency denomination.
4. Would the premium amount be higher for NRI policyholders as compared to Indian residents? And, would there be any limit assigned on the sum assured amount?
No, as per standards, the premium amount for the term plan for NRIs is the same as that of Indian residents. However, if the non-residents are living in a country where there are higher risks, the amount of premium may go higher.
Regarding the sum assured of the term plans for NRIs, there are some insurers e.g. LIC (Life Corporation of India), where if the NRI applicants choose to conduct their medical tests abroad, can limit the sum assured amount to Rs 1 crore. However, if they get their medical tests conducted in India, there are chances they can get a higher cover amount.
Once you have gone through these rules & regulations meant for term insurance for NRIs, the next question arises is whether buying a term plan is worth all the efforts or not.
As an NRI, you can consider following tips before zeroing-on a specific term plan:
- Cost of the Term Plan:
To begin with, you can check if there is any difference between the cost of the term plans provided in your country (where you’re currently residing) and India. On a broader aspect, a healthy 40-yr old individual who opts for a 20-year level term plan in the US may have to pay approximately $800 a year to get a cover of $500,000 as the death benefit.
- Tax Regulations
Term plans for NRIs in India generally offer tax benefits on death as well as maturity benefit. However in other countries, say in the US, death benefits are not completely tax free. As an insurance holder, you will only get the tax rebate to the extent of sum assured paid as death benefit. Any other amount beyond the sum assured, e.g. bonus amount, will be included in the tax-liable amount.
- Policy Surrender / Claim Settlement
Say, you have bought a term plan for 20 years, but due to some reasons you decide to leave the country in 15 years, you may face some problems to get your policy settled. Again, in case your insurance nominee does not know the work culture and the local language of the country, s/he may face issues during a claim.
Different Indian Insurance Companies Providing Term Insurance for NRIs:
There are many Indian insurers that provide NRI term insurance service such as LIC, ICICI Prudential Life Insurance, Kotak Life Insurance and Max Life Insurance.
You can easily buy these plans while you visit India. You can also buy these plans from foreign shores. In this case, the policy purchases will be performed through Mail Order Business.
You can also use the online portals as it is much easier and simpler. You can also pay the online premium and get the digital copy of your policy document instantly.
In a Nutshell
The choice to buy a term plan in India or in a foreign country is entirely the proposer’s choice. However, taking the aforementioned factors such as applicable tax laws in India as well as the country where you are currently residing in, the costs included and your life situations will help you make an informed decision.