A Non-Resident Indian (NRI) who has roots in India may consider buying a life insurance policy in this country. With the Indian economy showing upward tendencies, it offers a good investment option in India, which will help in your financial growth.
The Foreign Exchange Management Act allows the purchase of term insurance for NRI in India. Many Indian life insurers offer custom-made policies for NRIs. The Indian diaspora is a considerable contributor to the investment ecosystem of the country; therefore, the business opportunities lying in that segment cannot be ignored.
What is Term Insurance?
Term insurance is the most basic type of life insurance. In term insurance, the sum assured is paid to the nominee in the event of the unfortunate death of the person who is covered. The premium of term insurance is normally very affordable, and it can grant a reasonably substantial amount of life cover.
Can NRI buy Term Insurance in India?
‘Can a NRI buy term insurance in India?’ is a question that is often asked by many. The answer to it is yes, as an NRI, you are within your rights to buy term insurance in India. You may buy the policy while visiting India or from the country of residence. The purchase of the policy from abroad will be subject to satisfactory verification from the Indian Embassy in that country.
If you are an NRI and are planning to buy life insurance in India, the things you need to know are as follows:
- Eligibility Criteria: As NRI you can buy life insurance in India subject to fulfilling certain conditions. In order to be eligible for buying life insurance, you need to have a valid passport that has been issued by the government of India.
- Process of Medical Examination: The medical examinations need to be done at the time of buying the life insurance policy. You may get the medical tests done by coming down to India. Alternatively, you may get the tests done and share the report with the insurer.
- Payment of Premium: You need to decide upon the method by which a premium may be paid for buying the life insurance policy. The policy may be bought by using foreign currency. In which case, the NRE or FCNR accounts are the payment gateways. Otherwise, a premium may also be paid in INR using your NRO accounts.
The table given below gives a comparison between NRE, NRO, and FCNR for payment of life insurance premium:
| CRITERIA/ACCOUNT TYPE | NRE (Non Resident External Account) | NRO (Non Resident Ordinary Account) | FCNR(Foreign Currency Non-Resident Account) |
| Suitability | Source of income only from abroad | Income source from India and abroad | For a person who wants to avoid currency risk |
| Type of Account | Savings, Current or Fixed Deposits | Savings, Current or Fixed Deposits | Fixed Deposits only |
| Premium Paid From | Abroad | India or Abroad | Abroad |
| Currency | INR | INR | Foreign Currency like US Dollar, Pound, etc. |
| Tax Liability | Exempt | Taxable | Exempt |
- Rate of Premium: There are certain countries that are classified as high-risk countries due to their political instability. If you happen to be living in such a country, you may have to pay a higher premium. It is assumed that people residing in those countries have higher risk perceptions than people staying in countries that are politically stable.
- Death Benefits: Irrespective of the country of residence, the sum assured is paid to the nominee of the policy in the event of death of the NRI policyholder. On submission of necessary documents by the nominee, the claim will be paid either in INR or in the currency where the NRI is residing.
- Ascertain Tax Liability: Current tax laws in India give exemptions in all stages of a life insurance policy – purchase, accrual of funds, and maturity value. However, it will be advisable for you to check the tax laws existing in your country of residence.
To sum up, one may safely conclude that the objective of buying a life insurance policy is to ensure financial safety to the near ones in the event of the death of the insured. It is critical to choose the right life insurer for the purpose. Apart from the returns and other financial considerations, you must do a reality check on the insurance companies. The pedigree of the company performance of the promoter group, claim settlement track record need to be at the top of your mind before placing a coin with any life insurer.
