Life insurance for NRI

Thanks to the increased insurance awareness, proactive financial planning has earned its due importance. Better yet, the premium for online term plans has decreased. This has grabbed the attention of Non-Resident Indians as well. They are looking forward to buying life insurance plans in India. As a result, the best insurance companies have re-strategized their business model to leverage this huge potential market.

Term Plans offers pure life coverage and offer financial security. Most term plans offered by the best life insurance plan providers in India can also be purchased by a Non-Resident Indian. In essence, these are the same plans that are offered to Indians resident as well.

The Purpose of an NRI Life Insurance Plan

For a Non-Resident Indian, whose spouse, children and parents live in India, a perfect NRI plan must offer the following features:

  1. Guaranteed Income- It must offer guaranteed income at regular intervals for the dependents.
  2. Wealth maximization- It must offer wealth maximization to the policyholder and his/her spouse to help them accomplish their financial goals.
  3. Children’s Education- It must offer a benefit that can be used to meet the children’s educational expenses.

Generally, a best life insurance plan is clubbed with a child plan to take care of the educational expenses of the insured’s children. In case the policyholder passes away, his/her children get a lump sum benefit and the future insurance premium is taken care of by the insurer.

Payment Mode

All individuals of Indian origin, regardless of their citizenship status, are eligible to buy life insurance plan in India. While an buyer can purchase life insurance in India from another country without any issues, additional expenses can be incurred by him/her. For NRIs, the cost conducting medical screening and sending the reports to the insured is not covered. The premium can be paid through the following modes:

  1. Remittal- Remittal of foreign currency.
  2. NRO Bank Account- For INR denominated plans issued to NRIs, NRO bank account can be used.
  3. NRE/ FCNR Bank Account- NRE/ FCNR bank account can be used for foreign currency denominated plans issued to NRIs,.

 

S.No

Account

Suitable For

Account Type

Premium can be paid from

Currency of premium

Tax

1.

NRE (Non-Resident External Account)

NRIs having a source of income only in abroad.

Savings/ current/ fixed deposits account

Abroad

INR

Exempted

2.

NRO (Non-Resident Ordinary Account)

NRIs having a source of income in a foreign country as well as India.

Savings/ current/ fixed deposits account

Both abroad and India.

INR

Exempted

3.

FCNR (Foreign Currency Non-Resident Account)

NRIs wanting to invest in India, who don’t want to expose themselves to currency-related risk(s).

Fixed deposit

Abroad

Any of the following:

  1. U.S. Dollar
  2. Pound
  3. Euro
  4. Australian Dollar
  5. Sterling
  6. Canadian Dollar

Exempted

 

When to Buy NRI Life Insurance?

Before an NRI gets insurance, he/she must have a fixed income source. While buying insurance at a young age is easy and hassle-free, if an NRI doesn’t act as an early bird and develops a pre-existing illness at the time of buying an NRI plan, he/she will have to pay an enhanced premium.

From Where to Get NRI Insurance?

From where should an NRI get insurance (i.e. from his country of residence or country of origin) is a debatable middleic. Before an NRI makes up his mind, he/she should keep the following factors in mind.

  1. Cost Variation- Insurance premium might vary from one country to the other. How economical it is to buy life insurance in India or the country of residence, depends upon the company.
  2. Tax Benefit Variation- Taxation policies vary from one country to the other. For instance, in India, the total income from life insurance policies is tax-free, regardless of whether it is a death benefit or maturity benefit. In the USA, the principal amount is tax-free but the earned interest taxable.

What are the Eligibility Criteria for Buying NRI Plans?

Mentioned below are the eligibility criteria for NRIs purchasing a plan in India.

  1. Indian passport- The insurance buyer must have held an Indian passport in the past.
  2. Person of Indian Origin - The insurance buyer / his/her parents or grandparents must have been a citizen of India.
  3. Spouse- The insurance buyer must be a spouse of an Indian citizen.
  4. Valid Passport- The insurance buyer must hold a valid passport issued by the Indian government.
  5. Common Life Insurance Myths
  6. A myth is nothing but a statement that isn’t backed up by facts and figures. Unfortunately, there are so many myths floating around in the insurance market that people have started believing them to be true. That being said, when a policyholder buys a life insurance plan, he/she shouldn’t trust any information blindly.