Should NRIs Buy Term Life Insurance in India?

Buying a life insurance policy had been a daunting task for NRIs. However, the Foreign Exchange Management Act has made it possible for Non-Resident Indians (NRIs) to take life insurance in India.

While several types of life insurance plans are available in the market for NRIs, term insurance or term plan is considered the purest form of life insurance that provides maximum coverage at an affordable premium.

This article elucidates whether NRIs should buy a term life insurance policy in India and why.

Term Life Insurance is basic life insurance that provides coverage for a certain period called 'term'. In case of the insured's demise, term insurance provides financial coverage to the nominee. The policyholder is required to pay the premium for the chosen term, and failing to pay the premium on time can result in a lapse of a policy. The term life insurance premium largely depends upon the policyholder's age, sum assured, and the policy term. The policyholder's location, health, profession, lifestyle habits, and medical history are also considered while calculating the premium.

Under the Foreign Exchange Management Act (FEMA), NRIs and PIOs (Persons of Indian Origin) are eligible to purchase term life insurance or other life insurance policies in India, regardless of where they are staying.

Since NRIs live across the world and have different financial requirements, the term insurance should be based on their specific needs. Therefore, most life insurance companies in India offer customised term insurance plans to NRIs. Furthermore, NRIs are free to pay the policy premiums in Indian Rupee or any other foreign currency specified in the issued life insurance policy through an NRE, NRO, or FCNR bank account.

Here is how buying a term life insurance policy from India can benefit NRIs:

1. Cost-effective term plans:

The biggest benefit of buying a term insurance plan from India is its cost. The term insurance premium in developed countries like the USA and Singapore is 40% to 60% higher compared to India.

So, considering the policy term and the yearly premium, buying a term insurance policy in India helps NRIs save a significant amount on the total premium outgo. The cost of add-ons and riders is also considerably lower compared to the cost in developed countries.

Besides, it could be difficult for the NRIs to find an insurance policy that can cater to their requirements in a foreign land. However, by purchasing the policy in India, they obtain life insurance that is specially catered to their needs.

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2. The convenience of medical examinations:

To buy an online term life insurance policy from India, the NRIs need to undergo a medical examination in the country of residence. The medical examination reports are sent to the insurer in India, and the insurer makes the final decision on issuing the policy and the premium amount after reviewing the results.

Notably, many leading insurers allow their customers to undergo video or telemedical exams to buy a term insurance policy. Besides, it is mandatory for insurers in India to cover death occurring at any place if the policy was purchased from India.

However, if the insurer requires you to undergo a medical examination in India, you will have to do it on your own. Hence, while choosing the policy, you should consider this cost, and it makes sense to buy such a policy when you are already in India.

3. Taxation:

Another advantage of buying term insurance in India is that you get several tax benefits from your life insurance policy. As per Section 80C and 10(10D) of the Income Tax Act, premiums paid, maturity benefits, and death benefits are tax-free, subject to terms and conditions.

However, you may have to pay tax on income received abroad, depending upon the prevailing tax rules in your country of stay. Furthermore, there is no Tax Deducted at Source (TDS) if the NRIs provide valid Form 10F and Tax Residency Certificate (TRC).

Here are the required documents that an NRI generally needs to provide to buy term insurance in India:

• Application/Proposal Form

• Passport copy

• Age proof

• Income proof

• Copies of medical records

• Medical examination reports

• Photograph

• Questionnaire for NRIs

Apart from these documents, you are also required to pay the first calculated premium amount.

To conclude:

Buying a term life insurance policy is crucial to ensure the financial security of your family in case of your unfortunate demise. Buying a life insurance policy from India has several benefits compared to buying it abroad. However, the availability of hundreds of life insurance plans can make choosing the right plan a daunting task. Hence, it is advisable to compare different term insurance policies considering various aspects, such as policy coverage, add-ons, riders, other benefits, premiums, claim settlement ratios, convenience to buy and renew the policy, customer service, company's goodwill, etc. The time you invest in choosing the best-suited term plan is worth more than ending up with the wrong policy and regretting it later.

Warm Regards,
Ketki Jadhav
Content Writer