- Date : 16/04/2021
- Read: 7 mins
Are you an NRI and wondering how to buy term insurance in India? What are the benefits you get? Read this article to find out.
Term insurance is rapidly emerging as the bedrock of financial planning. Thanks to term insurance policies, one can bequeath a substantial amount to one’s dependents in case of a tragedy. So, the dependents do not need to compromise on their aspirations or standard of living in case of the unforeseen demise of the policyholder.
One can enjoy complete financial security with term insurance, wherever they may be in the world. Term insurance is a type of insurance product wherein you pay only for the cost of your life. This cost covers the risks of life we all face and, in return, it gives us complete peace of mind.
NRIs and term insurance
NRIs (Non-Resident Indians) are an enterprising lot. They are financially savvy and are keen to offer better opportunities to their loved ones. They are aware that term insurance plans can add substantial value to their financial portfolio. However, the needs for NRIs could differ substantially from that of Indian residents, so it is essential for NRIs to define their requirements clearly.
But can NRI purchase term Insurance in India?
The short answer is ‘yes’. NRIs are eligible for term insurance. They have two options while signing up for a term insurance plan. They can purchase the policy while visiting India; the whole procedure is executed in the same manner as it is for an Indian resident. Alternatively, an NRI can also purchase an insurance policy from their country of residence. This will involve more cost towards administrative charges.
Some additional verification may be required, which can be done by Indian embassy officials and a notary. Once these formalities are completed, the policy document is issued after verification by the insurer.
Who is NRI?
Before we touch upon the term insurance plans for NRI, it is important to understand what does NRI mean and who qualifies as an NRI.
An individual who holds an Indian passport and has stayed for less than 182 days in India during the previous financial year, or has been in India for less than 365 days in the preceding four years and 60 days during the current year is considered an NRI as per the Finance Act 2020.
Features of term insurance plans for NRIs
1. Sum assured
Sum assured for NRIs starts from Rs 2 lakh to Rs 1 crore. An NRI can choose any sum assured within this range, depending on their need. Once they have decided on the sum assured, they can go ahead with the procedure.
2. Premium amount and payment mode
Insurance premium is not a fixed component. It depends on the sum assured, riders, frequency of payment, etc. It also depends on the policyholder’s age and health condition, with older people generally paying higher premiums. A comparison of features and premiums across insurers can be easily made online. NRIs can also opt for online premium payment. For this, they need to have a bank account in an authorised bank that permits electronic transfer. The premium can be paid monthly, quarterly, half-yearly, or yearly.
If the payment is made via Indian bank account, then it can be paid in INR through NRE or NRO Account. If it paid via foreign bank account, it needs to be paid by instructing the banker to remit funds electronically through SWIFT into the insurer's bank account.
3. Tenure of policy
The tenure of the insurance policy for NRI varies; it can range from 6 months to 25 years. However, NRIs need to follow an age bracket. To purchase a term insurance plan for NRI, they must be in the age group of 18 to 60. Some insurers may have an upper cap of 55 years.
There are some requisite documents for term insurance NRIs need to provide while purchasing a term insurance plan, such as the following:
- Passport copy (attested)
- Filled up and signed application form
- Documents specifying health conditions (like a recent check-up report)
- Age proof
- Income proof
5. Special grace period
For NRI term plan holders, there is a specified grace period in case they default on premium payment. Therefore, if for any reason, NRIs miss out on premium payment, they can pay the same within the stipulated grace period. For policies where premiums are paid every 6 months or 1 year, the grace period is 15 days.
6. Tax benefits for NRIs
NRIs can enjoy tax benefits on the income they earn in India. Premiums paid for term insurance in India are deductible from taxable income under Section 80C. They can thereby save tax on an annual basis.
7. Death benefit to the nominee
A term insurance policy purchased in India will cover death occurring in any part of the world. The death benefit amount would be credited to the NRO bank account of the beneficiary. However, the death benefit would be repatriable to the extent of the premium paid in foreign currency as a portion of the total premium that has been paid. So if the premiums are entirely in Indian rupees through the NRO account, the death benefit wouldn’t be repatriable.
Note: The nominee need not be an Indian Resident.
9. Multiple term insurance policies for NRIs in India
An NRI can purchase multiple term insurance policies in India. However, if one is choosing to conduct medical examination abroad, the sum assured would be capped at Rs 1 crore. But if the NRI gets the medical examination done in India, the sum assured would be higher. Incidentally, certain insurers may also provide the option of tele-medical examination.
10. How is it different from a general term plan for Indian residents?
As written earlier, it depends on where the NRI is purchasing a term plan.
Suppose the NRI is getting his/her medical examination abroad and procuring the term insurance from there, then the following occurs:
The NRI (located abroad) will have to purchase the policy (from a preferred insurer in India) through mail order business.
The NRI subscriber will have to get the policy verified through a notary (which in this case would be either an Indian diplomat or an Indian Embassy official).
Those who are studying abroad can also procure a term insurance policy by getting the policy verified by a senior university official such as the Dean or the Supervisor.
If the NRI comes to India and purchases term insurance, it would be similar to how Indians based out of India purchase term insurance. The sum assured would depend on a variety of factors such as the location and job profile of the NRI.
There is no difference in the premium paid by an NRI and an Indian citizen based out of India, but the premium could also be higher if the NRI is from a country where the level of associated risk is higher.
A good term insurance plan can guarantee a stress-free life. Every person is eligible for this protection, and NRIs are no exception. The features are appealing and the benefits unending.