Life Insurance Policies for NRIs in India

If you are an NRI and wondering whether purchasing a life insurance plan in India is the best route to take, then here are some considerations that are sure to help you make a more informed decision.

Can a Non-Resident Indian purchase a Life Insurance Plan in India?

According to FEMA, all NRIs and Persons of Indian Origin (PIOs) are eligible to purchase more than one life insurance policy in India. If you are residing abroad and want to invest in a life insurance policy for your family, you are entitled to do so, irrespective of whether you are currently a citizen (of India) or not.

Do you have to be present in the country at the time of purchase of the policy?

It is a choice that the insured individual has to make for himself. There are multiple advantages and disadvantages to this feature. For example, you may have to incur some additional costs if you are investing in a life insurance policy in India from another country. Purchasing a policy from abroad will require you to do a medical examination, post which a report containing the results will be sent to your insurance company in India. On the other hand, if you are purchasing a life insurance policy from India itself, the cost of the medical examination will be included under the total cost of the policy, which saves you a huge chunk of your money.

How can you pay the premiums?

Following are some of the modes through which an NRI can pay his/her premiums:

• Remittance from your place of residence (country you are currently residing in)
• If you are an NRI who is sourcing income from both India and abroad, you are qualified to be an NRO (Non-Resident Ordinary Account). Subsequently, if you have an NRO bank account, you can make use of it to pay your premiums. Having said that, in this scenario your account type can be savings, current, or fixed deposits and the money can be deposited from anywhere in India or abroad. Your premiums are taxable in this case.
• If you are an NRI who holds interest to buy a life insurance policy in India while at the same time doesn’t want to own any financial risks, then you qualify as an FCNR (Foreign Currency Non-Resident Account). Make use of any currency of your choice, although in this case you can only make use of a fixed deposit to pay your premiums. You will be exempted from all tax deductions in this framework.

While paying the premiums you also need to take into consideration the fact that not all insurance companies accept foreign currencies, hence it is always advisable to conduct a thorough research about the insurance company before investing. For NRIs, it is also vital to compare insurance plansto determine which one is best suitable to their needs.  

What is the difference between the amounts paid as premiums by a resident and an NRI?

Essentially, there is no difference between both the amounts. The premiums for both a resident of India and an NRI are same. Although, this comes with its own disclaimers. If you are the resident of a country where risks are relatively higher, you might have to pay higher premiums. Where the sum assured is concerned, if an NRI conducts his medical examination abroad, he/she will be eligible for a sum assured of Rs.1 crore. However, if the same person is conducting the examination while on a visit to India, he will qualify for a higher coverage.

What are the guidelines concerning maturity and death benefits?

If you have purchased a life insurance policy in India, it is bound to cover death irrespective of where it happens. Although, take into consideration the fact that death and maturity proceeds are repatriable (possess the ability to be moved from a certain place to the investor’s home country) and if you have paid the premiums in Indian currency using the NRO account, your proceeds will unfortunately not be repatriable. If you had bought the policy before becoming an NRI, the policy status will not be affected in any way.

Should an NRI invest in a health insurance plan in India?

Section 80D under the Income Tax Act copes with matters of premiums paid on health insurance policies. It clearly states that an NRI is qualified for claims in the same mannerism as a resident while concerning tax deductions. Excluding the deduction of Rs.25,000 for the policy itself, you are also qualified to a separate amount of Rs.25,000, provided you have parents that are based out of India and are regularly paying for their health insurance policies. Section 80D of the Income Tax Act significantly reduces your tax liability if you have a taxable income in India.

Being an NRI, one can also consider investing in a term life insurance policy. It fundamentally guarantees protection of the insured person’s family in case of sudden demise. Excluding a few differences, the features encompassing term life insurance policies and whole life insurance policies generally remain the same for both residents and NRIs.