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Term Insurance for NRI

  5/2/24 12:18 PM

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  5/2/24 12:18 PM   |

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Term insurance is one of the popular and fundamental investments that you can add to your portfolio. Term insurance is also known as pure life insurance, where you pay premiums to the insurance company for a specific duration in return for life coverage. In case of your unfortunate demise within this period, the insurance company will pay out a pre-determined sum of money or the sum assured to your nominees as per the policy guidelines. While term insurance is widely available for all Indian residents and citizens, NRIs can also purchase these plans. Let us learn more about the same below.

What is Term Insurance for NRIs?

Term insurance for NRIs can be defined as term insurance plans which are specifically tailored for the needs of those who are either Non-Resident Indians (NRIs), PIOs (Persons of Indian Origin), or OCIs (Overseas Citizens of India) and their families. These policies will secure the financial future of the policyholder’s family in case something unfortunate happens to him/her. They provide a lump sum amount as the sum assured in this case.

NRIs can easily purchase term insurance policies from Indian insurance companies, thereby protecting their families even if they are residing in other countries. NRI term insurance plans come with diverse coverage and tenure options and customers can purchase them either offline or online, depending on their convenience. Telemedical check-ups have also made the process simpler for those who require these examinations before purchasing term insurance policies.

How Do Term Insurance Plans for NRIs Work?

The modus operandi for term insurance plans for NRIs is the same as regular term insurance policies in India. A premium has to be paid by the policyholder to the insurance company at predetermined intervals. In return, the insurance company will provide pure life risk coverage where a fixed sum assured is paid out to the policyholder’s nominee in case of his/her unfortunate demise within the policy period.

NRI customers may also select Return of Premium (ROP) options where the total premium paid is given back to them at the time of maturity in case they survive the policy tenure. Several add-ons or riders may also be added to term insurance policies by NRIs, ranging from accidental death and disability riders to critical illness riders and many others.

Key Features of Term Insurance Plans for NRIs

Here are some key aspects related to term insurance plans for NRIs:

  • NRIs can easily make payments via their NRE (non-resident external accounts). Payment methods like net banking and debit/credit cards are readily accepted by insurance companies for premiums.
  • NRIs can choose their desired life coverage, depending on the future costs of the household, current liabilities, future goals of family members, and after accounting for inflation. In general, life coverage can be availed from Rs. 1-20 crore, depending on individual requirements.
  • The policy tenure can also be selected in a flexible manner and may range between 5 years to 99/100 years of age.
  • The minimum age limit for purchasing term insurance is 18 years, while the maximum age limit is usually 65 years.
  • There is simple documentation for purchasing NRI term insurance, where identity and address proof has to be submitted while applying, along with KYC documents, income proof, passport, and medical test reports.
  • NRIs can get tax deductions on their premium payments under Section 80C up to Rs. 1.5 lakh per annum. If they add riders like critical illness rider or other health riders, then the premium paid for the same will also be eligible for tax deductions up to Rs. 25,000 (maximum Rs. 50,000 for senior citizens) under Section 80D.

Eligibility for Term Insurance for NRIs

The eligibility criteria for term insurance for NRIs usually include the following aspects:

  • NRIs should be Indian citizens living temporarily in foreign countries and should hold valid passports.
  • PIOs or OCIs are citizens of foreign countries and should fulfill specific criteria including possession of an Indian passport in the past, grandparents/parents who were Indian citizens, or be the spouse of an Indian citizen.

Advantages of Purchasing Term Insurance for NRIs

There are several advantages of investing in term insurance for NRIs. Some of them include the following:

  • Bigger life coverage at comparatively reasonable premium amounts as compared to many international insurance policies.
  • Flexible options for paying premiums such as monthly, quarterly, bi-yearly, or even annually, depending upon your convenience and the plan chosen.
  • Telemedical/video check-ups are now possible for NRIs and they can schedule the same in their countries of residence to easily avail of term insurance in India.
  • NRIs can choose long-term coverage that goes up to even 99 or 100 years of age. Hence, they can safeguard their families, especially if they will be dependent on their incomes in future years.
  • Limited pay benefits are also available for NRI term insurance buyers. This means that recurring payments are only done for a limited and predetermined duration. Yet, the life coverage will remain in place throughout the entire duration of the policy.
  • There are several riders to choose from in order to widen the scope and coverage of the policy. Some of the most-preferred ones include premium waiver upon disability, critical illness coverage, accidental death or disability, terminal illness benefits, and so on.
  • Lower premium rates and seamless claim settlement procedures, along with high claim settlement ratios of Indian insurers are other reasons that NRIs should keep in mind.
  • One of the biggest advantages is the large number of Indian insurance companies, meaning that NRIs can have a wider range of choices in terms of plans and features.

Documents Needed for NRI Term Insurance

Here is a list of the documents that you will require to buy term insurance for NRIs:

  • Back and front side of passport
  • Bank statements of last six months and salary slips of last three months
  • Proof of employment ID
  • Last entry-exit stamp
  • Valid copy of visa
  • Proof of foreign address
  • Photograph

FAQs

What will happen in case I get NRI status after buying term insurance in India?

If you have term insurance already, then there is no need to worry. You can reach out to your insurance company and enquire whether your policy will remain active after you shift to another country, while giving details of your new location. Many insurers may allow you to keep the policy active in this case.

Can I buy more than one term insurance plan?

Yes, it is possible to purchase multiple term insurance plans to increase financial protection for family members and dependents.

Does the NRI’s country of residence impact the premium amount?

Most insurers will charge similar premiums for both Indian citizens and NRIs across their policies. However, the premium amounts may increase for NRIs staying in countries with military or civil unrest and political instability.

Is GST payable on insurance plans?

Yes, GST is charged at the rate of 18% for insurance policies in India, irrespective of the policy type and other aspects.

Can I change the premium payment frequency after buying the term insurance plan?

You can change the premium payment frequency after purchasing your policy. However, you may have to wait till the due date of the next premium and abide by the specific regulations mentioned in the policy document for this purpose.

 

Aastha Mestry - Portfolio Manager       
An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.

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