Deciding to explore work or study opportunities abroad opens the door to a new and exciting chapter in your life. However, despite the distance and the pursuit of personal and professional growth, the love and attachment to your homeland remain unparalleled. Being far away from your family and country often amplifies the desire to provide them with support, especially during crucial moments.
Term life insurance for NRIs emerges as an essential means to fulfil this commitment, allowing you to care for your loved ones while you are away. It serves as the key to ensuring that they are shielded from any uncertainties that life may present, should something unfortunate happen. In this comprehensive guide, we will take you through the intricacies of a term insurance policy and how it can be a suitable choice for NRIs looking to secure their families.
Who Is An NRI?
NRI, which stands for Non-Resident Indian, is an individual with Indian nationality or origin who has not resided in India for a prolonged period. NRIs are those who have chosen to relocate to different countries for reasons like employment, business ventures, educational pursuits, personal preferences, etc.
What Is Term Insurance For NRIs?
Term insurance for NRIs functions similarly to a regular term insurance plan by offering financial protection to your family in your absence, irrespective of your residential status. To keep the policy active, you are required to pay regular premiums to the insurance company.
How Does Term Insurance For NRIs Work?
Term life insurance is pure risk coverage, meaning that it provides coverage in the event of your untimely demise during the policy period. If you pass away while the policy is in force, the insurance company disburses a predetermined sum to your family, known as the sum assured. However, if you survive until the end of the policy term, the policy does not provide any benefits.
You have the option to purchase a term insurance policy from Indian insurance companies, providing coverage for your current country of residence. It is essential to highlight that with the exception of suicide within the first year of policy purchase, a term insurance plan in India extends coverage to any type of death worldwide. In the unfortunate event of suicide during the first policy year, the insurer will refund the premium to the nominee.
In essence, by obtaining a policy in India, your family is assured of receiving the claim regardless of where your demise occurs during the policy term - in any other part of the world.
Can NRIs Purchase Term Life Insurance In India?
Certainly, NRIs have the option to purchase a term insurance plan in India easily. This opportunity extends to all individuals of Indian origin, regardless of their current citizenship status. NRIs can seamlessly buy a term insurance plan in India without being constrained by geographical boundaries. The purchase process involves submitting essential documents, such as valid address proof, recent income tax returns, etc., to establish their Indian citizenship.
As an NRI, a term insurance policy is worth considering in the following situations -
• If you are the sole breadwinner in your family and have family members relying on your income for their living.
• If you have invested in properties in India and have loans associated with them. The claim amount from the term insurance policy can assist your family in addressing both short-term and long-term needs - should something unexpected occur.
How Can NRIs Buy Term Insurance In India?
If you are thinking about getting a term insurance plan in India, here is a guide that can be helpful -
1. Purchase Process
For NRIs seeking term insurance coverage, there are two options available, as outlined below:
• Purchasing The Policy From India
When visiting India, NRIs can conveniently acquire the policy, following a process similar to that for Indian citizens. The simplicity of the entire procedure makes it relatively more straightforward. You can opt for a plan that seamlessly aligns with your specific needs, customising it according to your preferred coverage, policy tenure, opting for features/benefits that suit your and your family’s needs, etc. You will need to provide personal details, submit the application form with the required documents (refer to the below list), and initiate premium payments as specified.
Documents Required For Purchasing Term Insurance In India?
If you are purchasing a term insurance plan in India as an NRI (Non-Resident Indian), you will be required to submit the following documents to the insurance company:
• Duly filled application form
• Attested copy of passport and visa
• Medical tests and reports
• Age proof certificate
• Proof of residence
• Income proof papers
• Last Entry-Exit Stamp
• Any other documents requested by the insurer
• Purchasing The Policy From Your Country Of Residence
You have the flexibility to buy the term insurance policy comfortably from your current place of residence, and this can be facilitated through mail order. The process involves thorough verification conducted by Indian embassy officials, an Indian diplomat, and/or a notary. Furthermore, the introduction of tele-medical checkups has streamlined the online purchase of a term insurance policy, offering a hassle-free experience for NRIs residing anywhere globally. By scheduling a video or telemedical checkup, you can efficiently complete the underwriting process from your country of residence.
It is crucial to thoroughly review the policy documents and conduct comprehensive research to make informed decisions.
2. Premium Payment
Indian insurance companies provide multiple premium payment options for term insurance policies catering to NRIs. Premiums can be conveniently paid through the following modes -
• Non-resident ordinary nature account (NRO)
• Non-resident external bank account (NRE)
• Foreign currency non-repatriable account (FCNR)
It is essential for NRIs to verify the currency in which the term insurance policy is issued. If the policy is denominated in a foreign currency, premiums will have to be paid in that specific currency from an NRE/FCNR account. Conversely, if the policy is issued in Indian rupees, premiums will have to be paid through an NRO account.
3. Payout Made By The Insurance Company
Similar to premium payments, the death benefit from a term insurance policy is disbursed in the currency specified on the policy document - either in rupees or foreign currency. Following the standard protocol of any regular insurance policy, the nominees of the NRI are required to submit the necessary documents in accordance with the policy terms to facilitate the claim payment process - in case of a claim. The insurance company will typically request documents such as the original policy document, identification proof of the nominee, the death certificate of the insured person, etc.
What Are The Benefits Of Buying Term Insurance In India?
Here are some compelling reasons why purchasing a term insurance plan in India is considered beneficial:
• Multiple Customisation Options Available
Term insurance in India provides a myriad of customisation options, empowering you to tailor a policy that precisely aligns with your and your family's specific needs. Here are some ways in which you can customise your term insurance policy -
• If you wish to customise your premium payment schedule according to your preferences, such as completing payments within a specific timeframe, like 10-15 years, you have the flexibility to opt for a limited pay option.
• If you want your term insurance coverage to grow over time, you can select the increasing cover feature.
• If you want to structure the payout to your family in monthly instalments rather than a lump sum, you can customise that as well.
• Death Is Covered Globally
With the exception of suicides within the first year of policy purchase, a term insurance policy purchased in India provides coverage for all types of deaths worldwide. In the unfortunate event of suicide during the first year, the insurer will return the premium paid to the nominee. However, for death occurring after the first year, regardless of the location, your family will receive the claim amount as per the policy terms and conditions. This ensures that the coverage extends globally, offering financial protection to your loved ones regardless of where your demise occurs.
• Protection Under Section 45
In accordance with Section 45 of the Indian Insurance Act, if a life insurance policy remains in force continuously for three years, an insurance company cannot investigate or reject a death claim on any grounds. This provision enhances the appeal of a term insurance policy in India, especially for NRIs, as it essentially ensures a payout to the family in case of the life insured’s demise after three years of continuous coverage within the policy period - as long as timely premium payments are made.
• Tax Advantages
Tax benefits* can be availed on premiums and the claim amount under the Income Tax Act of India, 1961, if you are filing taxes in India. Below are the tax benefits available if you buy a term insurance policy in India.
• A key tax advantage of term life insurance is associated with the premiums paid toward the policy. Premium is basically the amount you need to pay to the insurance company to keep the term insurance policy coverage active. According to Section 80C, you are entitled for tax deductions of up to Rs 1,50,000 for the premiums paid annually for the term insurance plan.
• Additionally, the death benefit received by your nominee in case of your unfortunate demise during the policy period is tax exempted under Section 10(10D) of the Income Tax Act#. This ensures that the financial security offered by the term insurance policy remains exempt from tax, offering greater peace of mind.
It is crucial to highlight that tax advantages* are based on the conditions outlined in Sections 80C and Section 10(10D) of the Income Tax Act, 1961. Furthermore, these benefits are subject to amendments periodically, underscoring the importance for NRIs to stay abreast of the dynamic tax landscape.
Wrapping up!
In conclusion, as Non-Resident Indians embark on exciting journeys abroad, the enduring commitment to their homeland remains, prompting the need for a term life insurance plan to secure their loved ones. With benefits like several customisation options, global coverage, etc., a term insurance policy in India becomes a prudent choice for NRIs seeking to ensure the well-being of their families.