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Life insurance processing for NRIs

TeamAckoNov 2, 2023

Life insurance can be complex for Non-resident Indians (NRIs) due to specific rules and regulations. This guide will help NRIs understand the benefits, eligibility, documentation, and regulations for obtaining life insurance in India. Read ahead for related details.

Life Insurance For NRIs

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The benefits of life insurance for NRIs

NRI life insurance policies offer cost-effective, comprehensive coverage with easy purchase and customisation options. Here are some of its benefits.

Cost-effective plans

NRIs are drawn to Indian life insurance policies for their competitive premium rates and tax benefits. These plans are more affordable than foreign offerings and provide similar coverage and benefits. Opting for a cost-effective NRI policy from India allows individuals to secure substantial financial protection without straining their finances excessively. Many of these plans come with guaranteed investment returns, making them an appealing choice for NRIs looking to build a safety net in India.

Wide coverage

Life insurance provides NRIs with wide coverage options catering to various needs. Term insurance plans offer financial security and substantial life cover over an agreed-upon tenure, safeguarding the policyholder's family in case of death. Some insurers also offer riders such as Critical Illness or Disability Benefits. NRIs can confidently invest in comprehensive policies tailored to meet their unique circumstances and ensure financial stability for their loved ones back home. Online platforms make the process easy and facilitate comparison between companies for competitive premiums. These extensive coverage options provide peace of mind, making life insurance an essential part of any NRI's financial planning toolkit.

Ease of purchase

Purchasing life insurance as an NRI is convenient, thanks to online accessibility. Proposal forms can be completed easily on the website of an insurance company. Approval times are fast, with many companies offering instant approval based on age and health conditions. Payment can be made through international credit cards or foreign currency accounts; minimal documentation is required. 

Customised plans for NRIs

NRIs can now benefit from customised plans tailored to their specific needs and goals. These policies cater to various requirements, such as retirement, child education, and savings. This allows NRIs to choose a plan that aligns with their financial goals and aspirations.For example, NRIs in the US can opt for an Indian life insurance policy with a shorter premium payment term to get higher coverage at lower premiums than those offered in their country of residence. Customised short-term policies can also be created for NRIs who only require coverage for a limited duration during their visits back home or based on their work schedule.By providing tailor-made plans, insurers enable NRIs to buy a policy that suits their specific needs and preferences, ensuring they are neither over-insured or underinsured. It also allows greater control over premium payments, with payouts aligned with personal objectives upon maturity/death claims as per Foreign Exchange Management Act (FEMA) regulations.

Types of life insurance policies available for NRIs

NRIs have several options available in India. Three common types include the following.

Term Insurance

Provides coverage for a specified term and pays out a lump sum to the nominee if the insured person passes away during the policy tenure.

Whole Life Policies

 Provides coverage for the entire lifetime of the insured person and comes with an investment component for accumulating savings.

Endowment Policies

Offers death and maturity benefits, with a lump sum payout in case of death during the policy period and upon completion of the policy tenure. It also comes with an investment component for building a corpus.

Eligibility criteria for an NRI to buy a life insurance policy

When purchasing life insurance in India as an NRI, meeting eligibility criteria is crucial. Here are the details.

Country of residence requirements

This includes country of residence requirements, typically providing a valid passport and proof of residency. Certain insurers may have additional requirements for residents of specific countries, such as extra documentation or higher premiums. Researching and comparing policies from different insurers can help NRIs secure affordable and comprehensive coverage that meets their needs.

NRIs from specific countries

NRIs residing in all countries might not be eligible to opt for life insurance in India. You need to meet the criteria set by the insurer.

Age limit requirements

Age is a crucial component when purchasing life insurance policies in India as an NRI. Most insurers require individuals between 18 to 65 years of age for Term Insurance. Younger policyholders receive lower premiums since insurers perceive them as less risky. Select a plan that aligns with your preferences and circumstances for maximum benefit.

List of documents required for buying a life insurance policy for NRIs

To purchase life insurance as an NRI, you must submit various documents, including the following.

  1. Submit an attested copy of your passport to prove your identity and nationality.

  2. Fill out an application or proposal form with basic information and policy preferences.

  3. If required, provide health documents, including medical reports and doctor's certificates.

  4. Show proof of income, such as salary slips or income tax returns for income-related policies.

  5. Submit age proof, address proof, and any other identity documents as requested by the insurance company.

Pre-existing medical conditions

When purchasing a life insurance policy, disclosing any pre-existing medical conditions is important. These refer to any medical condition you already have before applying for the policy. Failure to disclose them may cause non-payment of claims in case of an unfortunate event. Knowing about waiting periods, premium loading, and medical check-ups is crucial, as they can affect your premiums and coverage. For instance, if you have hypertension or diabetes, your premiums might be higher. It's essential to know the waiting periods attached to certain illnesses. Disclosing pre-existing medical conditions can help find an affordable policy that covers all major risks associated with death and disability at reasonable rates based on individual circumstances like age group & occupation status. 

Rules and regulations for NRIs while buying life insurance in India

When purchasing life insurance as an NRI in India, there are certain rules and regulations to be aware of. Here’s a list.

Maturity and death benefits

Understanding the maturity and death benefits of policies is crucial for NRIs. A policy reaches maturity when the term ends successfully without claims, and the payout includes premiums paid and interest/bonus earned. 

In the unfortunate event of death during the term, compensation is provided to the nominee/dependents as per the sum assured. While these payouts are tax-free in India, NRIs should consult their financial advisor/tax consultant for any tax implications based on their country of residence.

Tax implications

Tax implications for NRIs investing in Life Insurance in India should be noticed.

Premiums paid towards the policy are eligible for tax deductions under Section 80C of the Income Tax Act, and NRIs can claim tax benefits on their investment. 

However, tax rules and regulations vary depending on residency status. For example, an NRI investing in an Indian Life Insurance plan but considered a resident taxpayer by Indian law because of spending over 182 days per year in the country will be taxed according to Indian law.

Conversely, an NRI who is a resident taxpayer of another country where they earn their income must pay taxes only per that country's taxation laws. NRIs interested in purchasing life insurance need to review both Indian and non-Indian taxation laws before buying a policy to maximise their investment benefits and avoid any unnecessary penalties.

Note: Life plan tax benefits are available only under the Old Tax Regime.

Compliance With FEMA regulations

FEMA regulations require NRIs to report their policy purchases to the Reserve Bank of India and comply with proper reporting of premiums and payouts. Non-compliance can cause penalties and fines. Working with a reputable insurance company can help ensure smooth adherence to FEMA guidelines. 

Receiving policy payouts

NRIs have two options for receiving payouts: in India or in their country of residence. If they choose India, applicable procedures must be followed. If they opt for their country of residence, there could be additional charges due to exchange rate fluctuations or tax regulations. Comparing both options before ensuring hassle-free financial support for loved ones is essential.

Secure your future 

Life Insurance is a recommended investment option for NRIs, offering long-term financial stability with cost-effective plans, wide coverage, and customised options. Before purchasing a policy, eligibility criteria, rules, and regulations must be considered. Choose a plan that best suits your needs and weigh your options for receiving policy payouts. Secure your future today by investing in the right life insurance policy as an NRI.

Frequently Asked Questions

Here’s a list of common questions and answers related to understanding the process related to buying life insurance in India for an NRI.

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Can NRIs purchase life insurance policies in their home country?

NRIs can purchase life insurance policies in their home country by visiting the insurer's office or online website/app. However, they must ensure the policy complies with their current country of residence's laws and regulations.

Are there any special requirements for NRIs seeking life insurance policies?

Some insurers may require additional documentation from NRIs, such as proof of identity, proof of overseas address, and residency status, to establish eligibility for coverage.

What are the benefits of purchasing a life insurance policy as an NRI?

A comprehensive life insurance policy offers financial security for your loved ones in case of your untimely death or an accident. It can also help build wealth over time with added investment options bundled within some policies.

How can I choose the right life insurance product as an NRI?

When choosing a suitable life insurance plan, consider factors such as premium affordability, policy coverage term duration, and possible optional riders available alongside it. Look out for plans offering high returns on investment and reasonable premiums!

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.

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