Life insurance is an important financial tool that provides financial security to the policyholder’s dependents in the event of the policyholder’s untimely demise.
The insurance policy pays out a lump sum amount to the nominee upon the death of the policyholder. Non-Resident Indians (NRIs) are individuals who reside outside India but have Indian citizenship.
NRIs often wonder if they can take life insurance in India. In this article, we will explore the various aspects of life insurance for NRIs in India.
Introduction
NRIs are an integral part of the Indian economy, contributing to the country’s growth through their investments and remittances.
They often have close family ties in India and a need for financial protection. Life insurance is a popular financial product in India, and NRIs can also take advantage of the benefits of life insurance in India.
Understanding life insurance
Life insurance is a contract between the policyholder and the insurance company, where the insurer agrees to pay a lump sum amount to the nominee in case of the policyholder’s death during the policy term.
The policyholder pays a premium to the insurance company to keep the policy in force. The premium amount is based on the policyholder’s age, health, and other factors.
Life insurance for NRIs in India
NRIs can take life insurance in India, subject to certain conditions. According to the Foreign Exchange Management Act (FEMA) guidelines, NRIs can purchase life insurance policies in India with Indian rupees.
The policyholder can also pay the premium in Indian rupees, foreign currency, or a combination of both.
Types of life insurance policies for NRIs
NRIs can choose from various types of life insurance policies in India, such as term insurance, endowment policies, ULIPs, and whole life insurance.
Term insurance is the most popular type of life insurance among NRIs as it provides a high sum assured at a lower premium.
Endowment policies combine insurance with savings, while ULIPs allow the policyholder to invest in equity or debt funds. Whole life insurance provides coverage for the policyholder’s entire life.
Benefits of life insurance for NRIs
Life insurance provides financial security to the policyholder’s family in case of the policyholder’s untimely demise.
The policy payout can be used to pay off debts, cover living expenses, and provide for the policyholder’s children’s education.
Life insurance also acts as a tax-saving tool as the premium paid and the death benefit received are tax-exempt under the Income Tax Act, 1961.
Factors to consider while taking life insurance in India
NRIs should consider several factors before taking life insurance in India. They should evaluate their insurance needs and choose a policy that suits their requirements.
The policyholder should also check the insurance company’s reputation, claim settlement ratio, and financial stability.
The policyholder should disclose all relevant information about their health, lifestyle, and family medical history to the insurer to avoid any future claim rejection.
Documents required for NRI life insurance
NRIs need to submit the following documents to purchase life insurance in India:
- Passport copy
- Overseas address proof
- PAN card copy
- NRE/NRO bank account statement
- Medical reports, if required
Premium payment for NRI life insurance
NRIs can pay the life insurance premium through various modes, such as electronic transfer, debit/credit card, or cheque.
They can also pay the premium in Indian rupees, foreign currency, or a combination of both. NRIs should ensure that the premium payment mode is compliant with FEMA regulations.
Tax benefits of NRI life insurance
NRIs can avail tax benefits on the premium paid and the death benefit received under their life insurance policy.
The premium paid is eligible for tax deduction under section 80C of the Income Tax Act, 1961, up to a maximum limit of Rs. 1.5 lakh per annum. The death benefit received by the nominee is tax-exempt under section 10(10D) of the Income Tax Act, 1961.
Claim process for NRI life insurance
In case of the policyholder’s death, the nominee should inform the insurance company about the policyholder’s demise and provide the required documents, such as death certificate and policy document.
The insurance company will verify the claim and settle the claim amount to the nominee’s bank account. NRIs should ensure that they provide the correct nominee details and keep their policy document and other relevant documents safe.
Limitations of NRI life insurance
NRIs should be aware of the limitations of life insurance in India. The policyholder should disclose all relevant information about their health, lifestyle, and family medical history to the insurer to avoid any future claim rejection.
The policyholder should also be aware of the policy’s exclusions and limitations, such as suicide within the first year of the policy term or death due to a pre-existing medical condition.
Conclusion: Can NRIs Take Life Insurance in India
NRIs can take life insurance in India, subject to certain conditions. They can choose from various types of life insurance policies and pay the premium in Indian rupees, foreign currency, or a combination of both.
Life insurance provides financial security to the policyholder’s family in case of the policyholder’s untimely demise and also acts as a tax-saving tool. NRIs should evaluate their insurance needs, choose a policy that suits their requirements, and disclose all relevant information to the insurer.
FAQs on Can NRIs Take Life Insurance in India
Can NRIs purchase life insurance policies online in India?
Yes, NRIs can purchase life insurance policies online in India. Many insurance companies in India offer online purchase of life insurance policies, which makes it convenient for NRIs to buy a policy from anywhere in the world.
NRIs can compare the features, benefits, and premium rates of different policies online and choose a policy that suits their requirements.
However, NRIs should ensure that they provide accurate information while filling out the online application form and follow the required KYC procedures.
Are NRIs eligible for the same sum assured as Indian residents under life insurance?
Yes, NRIs are eligible for the same sum assured as Indian residents under life insurance. The sum assured is the amount that the insurance company promises to pay to the nominee in case of the policyholder’s death.
The sum assured is decided based on the policyholder’s age, health, lifestyle, and other factors. NRIs can choose the sum assured based on their insurance needs and the premium they can afford to pay. However,
NRIs should ensure that they disclose all relevant information to the insurer while buying the policy to avoid any future claim rejection.
Can NRIs avail of term insurance policies with a critical illness rider?
Yes, NRIs can avail of term insurance policies with a critical illness rider. A critical illness rider is an add-on benefit that provides coverage for specified critical illnesses, such as cancer, heart attack, stroke, and kidney failure.
The rider pays a lump sum amount to the policyholder on the diagnosis of a critical illness, which can be used to cover the medical expenses or other financial needs.
NRIs should check with the insurance company whether the critical illness rider is available with the term insurance policy they intend to purchase and the terms and conditions of the rider. The premium for the rider is generally added to the base premium of the policy.
Can NRIs purchase life insurance policies for their parents residing in India?
Yes, NRIs can purchase life insurance policies for their parents residing in India. Many insurance companies in India offer life insurance policies for parents of NRIs. NRIs can buy the policy online or through an insurance agent in India.
The policy premium is generally higher for parents who are older and have pre-existing medical conditions. NRIs can choose the sum assured based on their parents’ insurance needs and their premium paying capacity. The policy payout in case of the parent’s death is generally made to the nominee, who can be the NRI or any other person chosen by the policyholder.
What is the maximum policy term available for NRI life insurance policies in India?
The maximum policy term available for NRI life insurance policies in India varies from one insurer to another. However, most insurers offer policy terms ranging from 5 years to 40 years or more, depending on the age of the policyholder and the type of policy chosen.
The policy term is the duration for which the policy remains in force, and the premium is payable for the same period. NRIs can choose the policy term based on their insurance needs and the premium they can afford to pay. Longer policy terms generally attract lower premiums, but the overall cost of the policy may be higher due to the longer duration.