Life insurance is a critical component of financial planning, providing peace of mind to policyholders and their loved ones. As an NRI, you may have purchased a life insurance policy to safeguard your family's financial condition in case of your unexpected demise. However, your life insurance needs may also change as your circumstances change. One crucial aspect to consider is whether your life insurance sum assured is sufficient to meet your dependents' needs. This article will look into situations where an NRI can consider increasing the sum assured.
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When should an NRI increase their Life Insurance sum assured?
In NRI life insurance, the term 'Sum Assured' represents the maximum amount an insurance company pays upon death or maturity of the policy. It helps beneficiaries with ongoing financial obligations like mortgages and daily living expenses.
In determining an appropriate sum assured, one must consider factors such as income, spending habits, and existing debts; NRIs should regularly review their policies. This practice allows them to maintain adequate coverage in the face of changing circumstances - a crucial step towards safeguarding the well-being of their families while optimising tax benefits.
Let's take a look at an example:
Mr Yash is a 35-year-old NRI who opted for a life insurance policy with a sum assured of Rs 1 crore. It implies that when the policyholder dies, the insurance company must pay out Rs 1 crore to the nominee mentioned in the policy. The policy also includes an increasing sum assured feature, where the death benefit increases by 5% annually.
In this case, the sum assured would grow as follows:
Year 1: Rs.10,500,000
Year 2: Rs.11,025,000
Year 3: Rs.11,576,250 and so on.
If the policyholder were to pass away during the policy, their nominee would receive the increased final sum assured as the death benefit, which is higher than the initial sum of Rs 1 crore.
NRIs should consider increasing their sum assured because of various reasons, such as changes in lifestyle and health conditions, increase in income and assets, approaching retirement age, rise in inflation and healthcare costs, growing family size, pre-existing health conditions, or critical illnesses of self or a family member. Let’s explore these situations in detail.
NRIs must regularly evaluate the impact of lifestyle changes and health conditions on their Life Insurance policies. This assessment is crucial as it affects the type and extent of coverage needed. Lifestyle changes such as moving to a different country or adopting new habits can directly impact their health.
Another factor is ageing; it can cause unforeseen medical complications, causing more extensive care than initially planned. Pre-existing critical illnesses require enhanced coverage for financial protection against high healthcare costs outside India.
Milestones such as marriage or childbirth must also be considered when increasing the sum assured to ensure ample support for dependents, even after retirement. Regular evaluation is crucial to make suitable modifications concerning premium payments and adequate risk coverage through life insurance policies tailored to changing personal circumstances.
As NRIs continue to earn more income and accumulate assets over time, evaluating and adjusting their Life Insurance coverage is crucial. With increasing costs of living and healthcare expenses, having a higher sum assured can provide more comprehensive protection.
For example, if you've recently acquired new assets or properties, adjusting your coverage can ensure they're adequately protected in unforeseen circumstances. Similarly, if your income has significantly increased due to career advancements or investments, upgrading your policy can help mitigate potential risks.
It's important to note that even minor adjustments to the sum assured can significantly benefit financial protection against unexpected events. Regularly discussing updates with your insurance provider based on significant changes can help prevent being underinsured when you need financial help.
Regularly reviewing their Life Insurance policies is essential for NRIs approaching retirement age to ensure adequate coverage. As people age, medical conditions may become more prevalent, increasing healthcare costs. Therefore, increasing the sum assured could be necessary to meet these expenses. Apart from this, NRIs may have different financial obligations and responsibilities, which may require additional coverage. One option could be investing in Pension Plans that provide regular income during retirement when there's no steady income.
It's also crucial to remember that if the premium amount for a life insurance policy was paid entirely from an NRO (Non-Resident Ordinary) account using Indian currency, the proceeds might not be transferable. Therefore, it's essential to consult with an insurance provider or agent about any changes in policy wording or tax benefits when nearing retirement age. This will ensure that NRIs are well-prepared for their retirement years with adequate coverage and financial security.
NRIs must consider inflation when increasing their sum assured for Life Insurance plans. Without adequate coverage, medical expenses can cause financial strain on families. Higher coverage can provide tax benefits and avoid out-of-pocket expenses during emergencies. Insurance companies offer bonuses and discounts for regular policy renewals. Sufficient coverage also helps with critical illnesses and provides financial protection for dependents. A large assured life insurance policy can offer support during terminal illness or death.
As NRIs' families grow, financial obligations also increase. This includes children's education, housing, food, clothing, and medical expenses. Insufficient coverage could cause significant financial strain. Regularly reviewing policies and adjusting the sum assured or opting for additional policies can secure your family's future.
NRIs with pre-existing medical conditions like diabetes, hypertension, or heart disease should increase their health insurance sum assured to avoid the high costs of medical treatment. A higher sum assured will provide comprehensive coverage, protecting individuals and their families from unexpected events.
Disclosing updated medical information is essential to avoid claim rejections or delays. Opting for policies with shorter waiting periods or coverage for pre-existing illnesses from the outset is wise. Annual health check-ups can help manage current health status and maintain physical well-being while securing financial protection through appropriate coverage levels.
NRIs should consider increasing their sum assured for health insurance due to critical illness or terminal illness of self or family members. This can help ease the financial burden of expensive treatments like chemotherapy and surgery, costing lakhs or even crores of rupees. A higher sum assured ensures that your financial obligations are met without draining your savings. A critical illness rider can also provide lump-sum benefits to pay off debts and cover ongoing medical expenses. It's never too early to get adequate coverage and ensure financial stability.
NRIs can increase their insurance coverage by contacting their provider or agent, updating their health information, paying additional premiums for increased coverage, and renewing policies annually. This ensures financial protection against healthcare costs and unforeseen emergencies.
NRIs should contact their insurance provider or agent to increase their sum assured for health or life insurance based on changes in their lifestyle, income, and health conditions. Share updated health and medical information to assess needs accurately, pay an additional premium and renew annually. Review policy wordings carefully to understand coverage. This ensures adequate financial protection, avoiding stress over paying medical bills from overseas and affecting financial obligations back home.
To increase your Life Insurance sum assured, provide your insurer with updated health and medical information. Follow these tips.
Record your current and pre-existing medical conditions.
Report any new illnesses or injuries.
List any medications or past surgeries.
Share lifestyle changes that could affect your health.
Be transparent about hereditary illnesses in your family.
By providing accurate information, you ensure the sum assured is calculated based on your risk profile, providing better financial protection against future medical expenses.
NRIs can increase their Life Insurance coverage by paying an additional premium. This ensures higher sums and better protection, especially for unexpected medical expenses. Paying an extra premium can also accumulate a cumulative bonus, which gets added to the base sum assured at renewal.
The terms and conditions may vary between different insurance providers and policies. However, policy renewal is essential for NRIs to ensure continuous financial protection.
Here's why.
Policy updates can affect the benefits/exclusions of your plan.
Renewal helps you avail cumulative bonus benefits in many life insurance plans.
Renewing your health insurance plan ensures coverage for pre-existing medical conditions without a break.
Renewing policies ensure adequate risk coverage to meet financial obligations in case of critical or terminal illnesses.
Renewal helps keep up with changing healthcare costs and inflation rates.
NRI Term Plans
Child Plans for NRI Top of Form
NRI Retirement Plans
ULIPs for NRIs
NRIs receive term life insurance policies that provide a death benefit similar to those available for resident Indians. These pure protection plans dictate the insurance company will pay out only if survival is not an option for the policyholder by the end of the term.
In the event of an unforeseen demise, NRIs can secure their children's future by purchasing child plans. Primarily designed to assist NRIs in saving for critical life goals of their children - such as higher studies - these life insurance plans offer additional benefits like waiver of future premiums upon the death of a parent who is also a policyholder.
In India, insurers extend the opportunity to Non-Resident Indians (NRIs) for retirement plan investments that secure a monthly income post-retirement through annuity purchases. Such plans earmarked for NRIs facilitate enhanced retirement planning, thus ensuring financial security beyond their regular earning years after they have ceased employment upon reaching the retirement stage.
Unit-linked insurance plans, or ULIPs, amalgamate the advantages of life insurance and investment into a single package; they represent a specific type of insurance policy. Non-resident Indian ULIPs operate under identical principles as those applicable to ULIPs for residents in India.
Here are some key pointers on how to buy NRI life insurance policies:
Some typical riders for term insurance include:
Provides additional financial protection for loved ones in case of an accident-related death.
Provides a lump sum payout to cover medical expenses and missed income during recovery for certain significant conditions.
This option waives future premium payments to ensure your life insurance continues to pay in case of severe illness or disability.
Choosing the right life insurance plan for NRIs involves several key considerations:
Seek plans that cater to your international financial requirements by providing coverage in various currencies.
Ensure the insurer provides an efficiently streamlined documentation process for NRIs, circumventing needless complications.
Choose plans that facilitate ease of transactions by allowing premium payments in foreign currencies.
Consider implementing policies that hedge against currency fluctuations to safeguard the amount of your coverage. This action will serve as a protective measure in response to potential shifts in currency values.
You should evaluate the tax implications in your country of residence and India, aiming to maximise the benefits of taxes.
Choose plans with flexible options that accommodate changing needs and circumstances.
Give priority to insurers with dedicated customer service for NRIs. This will ensure prompt and efficient handling of any concerns.
Evaluate the convenience and effectiveness of the claim settlement process; this includes assessing how easily funds can be repatriated, where applicable.
The main factors that impact the NRI life insurance premium are:
Younger individuals are considered less risky to insure. Therefore, their rates are often lower. Premiums often climb as the risk of health issues increases with age.
Your medical history and current health status significantly impact premiums. Healthy NRIs can pay lower premiums for health insurance plans. However, those with pre-existing conditions may pay more or be denied coverage.
Certain lifestyle choices, such as smoking, drinking, or engaging in dangerous activities, may result in higher premiums.
Your occupation may impact insurance premiums. People working in high-risk professions may pay more rates than NRIs in low-risk employment.
Although they might increase rates, additional riders and features, such as critical sickness or accidental death benefit riders, provide greater benefits and protection.
There are a few critical considerations when selecting the best term life insurance plan for NRIs.
First, consider the total assured, policy duration, and premium payment options. If you need extensive coverage for your loved ones, you can opt for the best term insurance plan for 1 crore or more. A term insurance plan calculator can help you estimate your rates based on your sum assured, age, and health status when selecting a plan. Remember, choosing life insurance policies that fit your present financial condition and future objectives is critical.
It is important to check if the insurer provides worldwide coverage and that the claims procedure is smooth and hassle-free if your dependents are located in different countries.
India-based insurers offer various life insurance policies for non-resident Indians. An NRI's optimal life insurance policy provides wealth creation benefits and financial security to family members. You have the option to compare different policies designed explicitly for NRIs based on their premiums, CSR values, policy terms, assured sums, and offered benefits.
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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Reviewed by Vaibhav Kumar Kaushik 
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