Term Insurance for NRIs in India

There is often confusion about NRIs (Non-Resident Indians) and their eligibility to take out a term insurance policy in India. Let us set the record straight: NRIs are perfectly eligible to take out term insurance from Indian insurers.

Since anyone living abroad needs to secure the future of their family or other dependents in India (just like someone living in India), term insurance can be an excellent tool for this.

This blog will be a perfect guide if you want to know more about term insurance for NRIs in India.

Who is an NRI (Non-Resident Indian)?

A Non-Resident Indian (NRI) can be an Indian citizen (someone having Indian citizenship and passport) or a Person of Indian Origin (PIO) (someone not having Indian citizenship and passport). Your residential status depends on the number of days you were in the country during the previous year.

So, if you were in India for less than 182 days in the preceding financial year (being an Indian citizen or PIO), you are an NRI. FEMA (Foreign Exchange Management Act) and the Income Tax Act have defined this limit.

After having enough clarity about the concept of an NRI, let us move forward and understand the different advantages of purchasing term insurance in India for a non-resident.

What are the benefits for a non-resident when buying term insurance in India?

Let us come back to our original case (involving Devesh). His friend suggested an Indian insurer to him because of the lower premiums. However, are there other benefits for NRIs seeking term insurance in India?

In fact, there are. We have listed the most critical ones:

1. Having term insurance from an Indian insurance company provides reliable financial security for families and dependents in India.

2. Tax benefits (Sec 80C and Sec 10(10D) can be availed by the policyholder.

3. Buying term insurance in India (online and offline) is very convenient.

4. NRIs get several customised and tailored options, thereby providing flexibility.

What are the critical features of term insurance plans for NRIs?

Here are the most salient features of term insurance plans for NRIs

1. There are flexible payment options. You can pay in different currencies (as supported by the insurer), and there are regular, single, and limited premium paying options.

2. The coverage is comprehensive, with different rider options, such as critical illness, accidental death, and disability benefits.

3. The policy can be managed online.

4. There can be repatriation of benefits* (depends on the insurer’s discretion)

*Allowing the transfer of policy benefits back to the NRI’s country of residence if needed.

How can NRIs pay premiums on insurance policies?

NRIs can pay premiums in various ways, including direct bank transfers from NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts, online payment gateways, or even foreign currency transfers (depending on the insurer's options).

Some insurance companies also allow payment for NRI term insurance premiums by third parties (such as relatives or family members).

What documents might be required to buy term insurance for NRIs?

Here is a list of documents that might be required to buy term insurance for NRIs. Please note that the list is tentative, and the insurer suggests the exact requirements:

• Identity proof: Valid passport and visa or residency permit.
• Age proof: Birth certificate or any other valid age proof document.
• Income proof: Salary slips, bank statements, or income tax returns to verify financial stability.
• Address proof: Both overseas and local (if any) address proofs are needed.
• Medical reports: Medical examinations may be necessary depending on the insurer's requirements and the sum assured.
• Nomination form: To designate beneficiaries for the policy.
• Filled application form: Including accurate personal, occupational, and health details.

Summing up

The responsibilities and obligations of an individual only increase while living abroad. To safeguard the future of the family and dependents and provide them with a safety cushion, an NRI can take a term insurance policy from an Indian insurance company.

Depending on your financial goals, you can choose between conventional term insurance and the ROP (return of premium) policy. Buying term insurance for an NRI is quite straightforward, and multiple personalisation and customisation options are available.

Despite the obvious benefits, there are a few myths related to term insurance for NRIs. We have tried to address them as follows:

Myth#1: NRIs cannot buy term insurance in India

Reality: This is a misconception. NRIs can indeed purchase term insurance in India and are eligible just like resident Indians, provided they meet the insurer's criteria​

Myth#2: Claims won't be settled if the NRI resides abroad

Reality: The place of residence does not affect the claim settlement process. Insurance companies in India are equipped to handle claims from NRIs living abroad, ensuring smooth and efficient settlements​.

Myth#3: NRIs need to be in India to buy term insurance

Reality: NRIs do not need to be physically present in India to purchase term insurance. The entire process can be completed online.

Myth#4: The claim settlement process is complicated for NRIs

Reality: The claim settlement process for NRIs is streamlined, much like it is for residents.

Myth#5: The premium rates are higher for NRIs

Reality: While the premium might vary depending on health and lifestyle risks, NRIs can access competitively priced term insurance plans in India.