Should You Buy a Health Insurance Policy in India as an NRI?

Nov 10, 2023 / Reading Time: Approx. 8 mins

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Should You Buy a Health Insurance Policy in India as an NRI?

According to the Ministry of External Affairs, as of October 2023, there are about 32 million Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs). Every year, 2.5 million Indians migrate overseas for education, jobs, and business opportunities, making the highest annual number of migrants in the world.

If you are among those, you know how expensive the medical treatments and health insurance policies are abroad. This is why most insurance agents and financial experts advise NRIs to buy health insurance in India, even though they are not living here currently or planning to move back anytime soon.

However, the question arises: is it really beneficial for the NRIs to buy health insurance in India? Many NRIs face this dilemma as they are not sure whether they will need medical assistance in India, whether they will even return to India permanently, and whether they can buy health insurance in India while residing abroad. This article explains all the aspects of this dilemma and provides guidance on whether you should buy health insurance in India as an NRI.

Health insurance for NRIs

Health insurance designed for Non-Resident Indians (NRIs), known as NRI health insurance, is a specific type of coverage that allows NRIs to buy a health insurance policy in India. The eligibility for this policy is determined by the individual's legal residential status in India.

NRIs have the option to purchase health insurance in India tailored to their needs, but they must provide documents such as address proof, passport, and other required paperwork for verification. While they can buy the NRI health insurance policy online, certain insurers may insist on buying the policy during their visit to India, as some plans may require a pre-medical check-up before issuing the policy.

The Cost of Health Insurance

The primary intention of most NRIs when buying a health insurance policy in India is to save on the premium amount, as the cost of health insurance in India is quite low compared to more developed countries. However, low cost should not be the only reason why NRIs would buy health insurance in India. If they are not going to return to India or get medical treatment in India, paying premiums over the years does not make sense.

Geographical Restrictions

It is important to know that most health insurance policies come with geographical restrictions. For instance, a policy bought in the USA might not offer coverage for medical treatment in India, just as a policy bought in India might not offer coverage for medical treatments performed outside India.

The terms like geographical restrictions are always mentioned in the policy document. Unfortunately, many NRIs buy the NRI health insurance policy in a hurry and ignore reading the fine print. This results in disappointment when they try to file a claim when they need medical assistance in the country of their residence.

This is why it doesn't make sense to buy a health insurance policy only in India when you are not living here. However, if you plan to take the treatment in India during your visit, you will need an Indian health insurance policy. When you buy health insurance in India, you can access insurance coverage across the country.

Keeping the Premium Low

Many NRIs think it is best to buy a health insurance policy in India when they are young as it will help them keep the premium low when they eventually return to India after 10-20 years.

However, this is a misconception. While this could be true for term insurance, as it locks the premium for the entire policy term, it doesn't apply to health insurance. Your health insurance premium increases with the age band.

So, for example, if you are currently 30 years old and buy a health insurance policy today, your premium will likely not be the same when you reach 40. Health insurance premium typically increases with the age band of 5 to 10 years. Hence, unlike term insurance, you cannot take advantage of early purchase to lock the premium. Your health insurance premium will increase when your age band changes, irrespective of when you initially buy the policy.

Therefore, it is not advisable for NRIs to buy a health insurance policy if their only intention is to keep the premium low when they return to India and need to have an India health insurance policy.

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Have Health Insurance Abroad

Some NRIs may possess a health insurance policy abroad as well as in India. In such situations, they might assume they can claim the same treatment from both insurance companies. When you have two life insurance policies, you can claim the benefit from both insurers. However, remember that health insurance is a reimbursement policy, and it is not possible to make claims and reimburse the amount from more than one policy. You can only file a claim for either insurer providing the required coverage in the geographical area of your treatment.

For instance, if you have two health insurance policies, one from India and the other from abroad, of Rs 50 lakh sum insured each and face a medical emergency in India, if your hospital bill comes to Rs 10 lakh, you can only claim a reimbursement of up to Rs 10 lakh from your Indian policy.

Visit to India

If you are someone who is living in a foreign country but has family and relatives in India, you may visit the country quite often. It is possible that during your visit to India, you may face a health issue and need to undergo medical treatment.

In such a case, you can either use your NRI health insurance policy or travel insurance policy to file a claim. Many insurance agents advise you to buy NRI health insurance so that you can stay worry-free during your stay in India. This makes sense when you visit frequently and for longer durations.

However, if you have commitments in a foreign country like education or a job, it might not be possible for you to visit India very often and stay for longer durations. Buying a travel insurance plan for the stay duration is more economical for these individuals than buying a separate health insurance policy in India.

Tax Implications

Buying a health insurance policy provides both financial assistance for covered medical expenses and the opportunity to enjoy tax benefits. When you buy health insurance in India, you can take advantage of tax benefits according to Section 80D of the Indian Income Tax Act. This provision is aimed at reducing your tax liability concerning your taxable income in India. The actual benefit you receive will vary depending on the premium you pay and the applicable tax benefit rates for the given financial year.

Include the Pre-existing Conditions

NRIs who plan to return to India after retirement often wonder if they can buy a health insurance policy in India if they develop a pre-existing disease/s later in life. This is a genuine concern because most insurers do not offer health insurance to individuals with certain pre-existing conditions after a certain age.

This means paying the health insurance premiums until you are living outside India will be a total waste. However, not buying the policy means taking the risk of having no health insurance coverage in old age.

Hence, if you are planning to come back to India after a few years or post-retirement and need a health insurance plan for the later stage of your life, it is a good idea to cover yourself with health insurance when you are fit and healthy.

Should You Buy a Health Insurance Policy in India as an NRI?

Considering the fact that you may not be able to buy a health insurance plan in the later stage of your life if you are diagnosed with a particular pre-existing condition, it makes sense to buy health insurance in India as an NRI. However, as discussed, you might have to bear a significant cost of premium for a long period, which is of zero use to you. Hence, finding the right solution for your unique circumstances is necessary.

In order to ensure you have the required health insurance coverage in your second inning, it is advisable to buy a nominal coverage or top-up health insurance plan when you are still fit and healthy. You can increase the sum insured or convert the top-up plan into a full-fledged health plan as per your requirement when you return to India. However, before buying the plan, ensure the policy you purchase allows you to increase the sum insured and/or policy conversion in the future.

You can also opt for a deductible and co-pay to reduce the health insurance premium significantly. A health insurance deductible is a claim amount that a policyholder must pay before the insurance company begins to pay for your healthcare expenses. The deductible amount is always specified in the policy document, and the insurance company does not pay/reimburse your claims unless you have paid the deductible.

Conversely, a co-pay is a fixed portion of a claim amount that a policyholder must pay out of their pocket. It can be either a fixed amount or a percentage of the claim amount. The insurance company decides the co-pay amount, and it may vary for different medical services. A policyholder has to pay the co-pay amount whether or not he/she has met the deductible.

Remember, the more the deductible and co-pay, the lower the premium you will pay. Since you are most likely not to be using the coverage of your NRI health insurance plan, it makes sense to reduce the cost of your policy by opting for deductibles and co-pay. Once you are back in India, you can pay the higher premium, get away with or minimise the deductibles, and co-pay to get the most out of your health insurance plan.

Moreover, many insurers impose waiting periods of 3 to 4 years for certain pre-existing diseases and critical illnesses. Hence, if you have purchased a top-up health insurance policy in India, it is advisable to convert it into a full-fledged plan at least 3-4 years before you return to India. This proactive step will ensure you complete all the waiting periods well in advance.

By following this approach, you can avoid the burden of paying a hefty premium for a health insurance policy that you will not be using anytime soon and ensure that you keep the status of your health insurance policy active.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

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