Term Insurance for NRI: Eligibility, Features and Types (2024)

February 09, 2024

In this policy, the investment risks in the investment portfolio is borne by the policyholder

Life is full of uncertainties and every person must remain prepared for the same at all times. One way of securing the finances and thus, the future of your loved ones is by taking out aterm insuranceplan. It not only safeguards your capital reserves but also guarantees a stress-free lifetime ahead. Every person is eligible for this protection and NRIs (Non-Resident Indians) are no exception to this.

Indian Diaspora forms a vibrant and important part of the populace in many countries globally and also makes up for an important economic segment. As such, the term insurance policy, that any NRI purchases must be completely as per her/his specific needs and requirements.

An NRI can easily take out a suitable term insurance plan and there are two ways in which this can be done. The person can purchase the policy while she/he is on a visit to India. The entire procedure is easy and follows the same steps as it would for an Indian citizen. Alternatively, an NRI might obtain the insurance coverage from their existing location. This can be done via mail order and requires detailed verification (that can be done by Indian embassy officials and a notary).

Term insurance policies for NRIs have flexible terms and conditions and the main corpus (sum assured) varies from Rs 2 Lacs to 1 Crore. The applicable premiums are variable, depending upon terms of the policy, the frequency of premium payments, age, health conditions etc. The term durations are also variable and range from anywhere between 6 months to 25 years. To purchase the plan, the person must be in the age group of 18 years to 60 years (although some policies may have an upper age capping of 55 years). Thepayment of premiumscan be done online (through net-banking) and for this, the policyholder must be an account holder in the specified banks (names of these banks are listed in policy documents).

NRIs can opt to purchase term insurance in two ways. They may either procure a term plan while they’re visiting India or from the country of their residence. Let’s look at how each procurement process works:

• While In India

Purchasing aterm plan for NRIs in Indiais quick and easy. The NRI simply needs to find an insurer they like and ask to purchase the policy. Once they complete the formalities, the policy is considered as a regular term plan purchased by Indian citizens. But, NRIs need to disclose their country of residence. Most insurers have a list of countries where they will not offer insurance. Additionally, if the NRI lives in a place where there is political instability, they may be subject to higher premiums.

• From the Country of Residence

The process to purchase term insurance for an NRI from abroad is slightly complicated. They have to buy the policy via Mail Order Business. The process requires the NRI to get verified by a notary and an Indian diplomat. Most NRIs require verification from an Indian embassy official for verification. Indian students who are studying abroad may ask their dean or supervisor to help them with the verification process.

• Policy Tenure

NRIs must decide their tenure when purchasing term life insurance in India. NRIs can choose a policy duration ranging from 6 months to 25 years.Most insurers today also provide whole-life insurance plansfor NRIs. To purchase term insurance as an NRI, you must be at least 18 years old and you cannot be older than either 55 or 65, depending on your insurer’s guidelines. While opting to purchase term insurance, you need to pick your tenure carefully. Experts advise policyholders to ensure they are covered until they turn at least 65. So, opting for a 25-year plan when you’re 40 or a whole-life plan at any point before that is ideal.

• Coverage

While purchasing term insurance, NRIs have the option to choose the kind of coverage or sum assured they want. Picking an adequate amount for your nominee is crucial. You need to ensure that the payout helps them look after certain expected expenses or any debt you may leave behind. Opting for a higher amount will ensure that inflation doesn’t significantly diminish your nominee’s spending power. You could also choose an insurance policy that automatically increases the sum insured by a certain percentage every few years. Or, choose a policy that enhances the sum insured at crucial life moments such as the policyholder’s marriage or once they welcome a child.

Features of NRI Term Plans

• Wide Policy Term Choice

Several insurance providers offer term insurance plans to Non-Resident Indians (NRIs). The term of these policies can be as short as six months or as long as 25 years. NRIs must be at least 18-years-old to be eligible to purchase a policy. In most cases, individuals cannot buy a term plan if they are over 60 or 65.

• Customisable Amounts

The sum insured is the most important factor to consider when selecting a term insurance plan. NRIs may opt for amounts as low as INR 2 lakhs or as high as INR 5 crore. Some insurance companies have no limit on the maximum amount insured. You can choose the amount covered based on your family's financial need.

• Easy Payments

To allow NRIs to keep their policies active even when they’re out of India, insurance providers accept payments via internet banking. They can also use foreign remittance or their NRO, NRE or FCNR accounts to make regular premium payments. Additionally, NRIs can choose how often they would like to make premium payments. Annual cycles often work the best.

• Quick Documentation

NRIs applying for a term plan need to provide a few documents with the application form. You must provide a copy of your passport along with documents that provide details about your age and income. While purchasing term insurance plans, NRIs also have to provide documents relevant to their past medical history. The insurance provider will use these details to decide the premium amount they can offer.

Term insurance for NRIs works like a regular term policy for Indian citizens. NRIs pay their premium amounts at regular intervals to enjoy the peace of mind that comes with having life cover. The policy provides life coverage for a certain period, unless the NRI has opted for a whole-life policy, in which case the coverage continues, irrespective of the individual’s age or policy tenure. If anything happens to the NRI during the policy term, their nominee receives the payout benefit as per the guidelines outlined in the policy documents.

Who is eligible to buy term insurance for NRI in India?

Like the general term plan, term insurance for NRI is also designed to provide financial security to the family of the policyholder in the event of his/her unfortunate demise within the policy term. The following set of individuals can buy term insurance for NRIs in India.

Non-Resident Indian (NRI):Indian citizens with valid Indian passports living abroad temporarily.

Overseas Citizen of India (OCI) or Person of Indian Origin (PIO):Citizen of foreign countries except Bangladesh or Pakistan, with Indian origin, provided they fulfil the following criteria-

• Had an Indian passport in the past

• Parents or grandparents were Indian citizens

• Spouse of an Indian citizen

Foreign nationals: Foreign citizens living in India

Buying an NRI term life insurance in India can be a prudent choice for the following reasons:

• A term plan for NRI in India can be customized according to specific requirements, offering wholesome coverage and protection to the NRI policyholder and his/her family. Features like limited pay benefits, tax benefits under 80C of the Income Tax Act, 1961, and online medical tests for term insurance have made it extra helpful for NRIs to opt for these policies.

• Term insurance for NRIs pays out the sum assured to the policyholder’s nominee if he/she dies an untimely death, compensating the lost income and financially securing the family from unwanted struggles.

• The family can fund their regular needs, pay for any outstanding loans/debts at the time of the policyholder’s death and come back to India if needed utilising the death benefit.

• The NRI policyholder can also opt for term insurance with a return of premium. Here, if he/she survives through the policy term, all the premiums paid will be returned upon maturity.

Types of NRI Life insurance policies in India

NRIs seeking to financially secure their loved ones with life insurance can choose from different kinds of plans. Here are the types of NRI term insurance plans available in India.

Term insurance for NRI:Similar to a traditional term plan, these plans are designed to offer only death benefits in the event of the policyholder’s death. Options like return of premium (ROP), critical illness rider, disability cover, accidental death cover etc. can be added.

NRI Child Plan:NRI child plans are meant to secure the child’s future in the event of the policyholder’s untimely death. Here, the death benefit is paid to the child so that his/her higher studies don’t get stalled due to the mishap. The waiver of future premiums benefit can also be added to enhance financial protection in case of the policyholder’s death.

ULIPs for NRI:Combining the benefits of life insurance and an investment opportunity, ULIP plans are also available for NRIs. These plans offer a death benefit to the nominee if the policyholder dies, and the fund value as a maturity benefit if he/she survives the term.

NRI retirement plans:Retirement plans in India are now available for NRIs too, who can buy an annuity plan to get a steady monthly income post-retirement. These plans help NRIs plan their retirement to stay worry free, as they’ll be financially protected even when regular earnings are no longer available.

When it comes to purchasing an NRI term plan, certain crucial factors need to be kept in mind. These are:

Policy coverage:The sum assured or the policy coverage requires a thoughtful decision in the case of NRI term insurance policies. This is because here the death benefit should suffice for the family to continue living abroad or to wrap up the settlement there and come back to India, along with funding life goals like marriage, child’s education etc. or paying back outstanding loans.

Policy term:The policy tenure in an NRI term insurance should be chosen carefully. While it can range anywhere between 6 months to 40 years, experts suggest one should continue the policy till he/she is 65 years old. However, the maximum maturity age in term insurance for NRIs can vary across insurance companies within the range of 55-65 years.

Documents Required to Buy Term Insurance for NRI

To apply for a term insurance policy, the NRI must provide:

• Duly filled application form

• Copies of the front and back of the applicant’s passport

• Income proof

• Age proof

• Residence proof

• Copies of medical records, where applicable

• Foreign Account Tax Compliance Act (FACTA) form

In the case of a term plan for NRIs, premium payments can be done in Indian Rupees or other foreign currencies. NRIs can make premium payments through net banking, credit cards or by cheques of NRE (Non-Resident External) or NRO (Non-resident Ordinary) accounts held with banks in India. In the case of credit card payments too, the first payment has to be made through cheque from a NRE or NRO account.

Some Indian insurance companies also allow NRIs to pay premiums directly from their overseas account through the SWIFT network. However, this is subject to some restrictions regarding accepted currencies for international remittance.

Conclusion

In this digital era, facilities like tele-medical checkups as well as online purchases and payments have ensured the smooth buying of NRI term insurance plans. Purchasing the policy in India can turn out to be a cheaper bet and can also help you save on taxes. Financially securing your loved ones can indeed be an easy affair.

If you still have questions about term plan for NRIs in India, we have the answers you need:

Q: Can NRIs buy term insurance plans in India?

A: Yes, NRIs are free to purchase term policies in India. They must check whether their chosen plan will provide the needed cover in their country of residence. Ideally, they should get written approval from the insurance provider.

Q: Can I buy multiple term plans?

A: Yes, many people opt to purchase multiple plans for enhanced protection.

Q: Once I purchase the policy, can I change the frequency of premium payments?

A: In most cases, yes, you can opt to change the frequency with which you pay your premiums. But you may have to wait until your policy is up for annual renewal before you make the switch. Always check your individual policy provider’s requirements.

Q: What happens if I become an NRI after I purchase a term plan in India?

A: If you have an existing plan, you need not worry. You can write to your insurance provider to ask if they will keep your plan active once you move. You will have to provide details about where you’re going. Most policy providers will allow you to continue with the term plan.

Q: What happens to the policy if an NRI fails to pay the Term Insurance premium on time?

If an NRI fails to pay the term insurance premium on time, a grace period is offered. Typically for a premium payment frequency of 6 months to 1 year, the grace period is 30 days. If you fail to pay the premium even within this window, the policy will lapse.

Q: Does the country of residence impact the life insurance premium for NRIs?

For similar kinds of applicants, most insurance companies charge the same life insurance premiums from NRIs and Indian policyholders alike. However, for applicants from countries having unstable governments, civil unrest or military issues, premiums may be higher.

Q: Are there any GST implications for NRI life insurance policies in India?

Yes, insurers charge a flat 18% goods and services tax (GST) for NRI life insurance policies, irrespective of their type.

Q: Can the frequency of premium payments be changed after purchasing the policy?

Yes, the frequency of premium payments can be changed after purchasing the policy, subject to certain regulations specified in the policy plan. However, for this, one might need to wait till the next premium is due.

Related Articles

• Basics of Term Insurance
• Can NRIs Buy Term Insurance in India?
• What Will Happen When a Term Life Insurance Policy Matures?
• 4 Simple Methods to Calculate : How Much Term Insurance You Need
• Term Insurance with Return of Premium
• Critical Illness Rider
• Limited Pay Benefits
• Accidental Death Cover

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