Term insurance for NRIs in India

Life insurance is a crucial part of financial planning for any individual or household. The essence of life insurance is to provide financial support to the family members of the person buying an insurance policy in case of an unfortunate event. There are multiple types of life insurance policies, however, the two major types of life insurance policies offered by life insurance companies are:

1. Whole life insurance policy

It provides insurance cover on the life of the insured. This includes paying the sum assured to the nominee if the policyholder has passed away or paying back the maturity proceeds to the policyholder at the end of the policy term. The premiums are a little higher for whole life insurance since it has both death and maturity benefits.

2. Term life insurance policy

These are pure insurance policies as there is no maturity benefit paid to the policyholder. The insurance coverage is provided to the policyholder for a specific sum assured and a specific number of years. In case of the demise of the policyholder during the tenure of the policy, the nominee is paid the sum assured. If there is no such event, the policy simply lapses at the end of the term.

The biggest advantage of term insurance over whole life insurance is that the premiums are lower for such policies. As a result, the policyholder can choose a policy with a higher sum assured, to provide comprehensive risk coverage to their dependents.

Who can buy term insurance?

Any individual residing in India can buy term insurance policies. If you are a Non-Resident Indian (NRI) and are wondering, ‘Can NRIs buy term insurance in India?’ the answer is yes.

Should an NRI buy term insurance from an Indian insurance company?

While exploring newer career opportunities, many Indian professionals settle abroad for a long period of time, while their family stays behind in India. In such cases, it makes sense for these NRIs to buy a term insurance policy from an Indian insurer. This is because in case of any unforeseen event, it would help their nominees to file the insurance claim without many procedural hassles.

How can NRIs buy term insurance in India?

Any individual residing outside India, or who is visiting India, may buy term insurance. The amount of the policy can range from Rs 2.5 lakh to over Rs 1 crore, depending upon the individual’s requirements. The process of buying term insurance for NRIs is largely similar to that for Indian citizens. The NRI, apart from choosing the right insurer and the best term policy that caters to their needs, with respect to the sum assured and the tenure, would also have to submit the following documents:

1. Passport (attested copy)
2. Proof of age
3. Proof of income
4. A medical report

How can an NRI pay premium on his term policy in India?

The premium on such policies can be paid through internet banking. It can also be done by giving standing instructions to the bank for auto-debit from the Non-Resident External (NRE) account if the payment to be made is in foreign currency, or the Non-Resident Ordinary (NRO) account if the same is in Indian currency.

How can the claim be filed under the term policy?

If the policyholder is no longer there, their nominees in India, or abroad, shall be eligible to receive the death benefit from the insurer as per the policy terms. The nominees will have to submit the following additional documents to the insurance company, along with the claim:

1. The death certificate, clearly stating the cause of death, issued by the Indian embassy in the country of the residence of the policyholder.
2. The certificate of employment issued by the policyholder’s employer.

How would the sum assured be paid to the nominee of the NRI?

The death benefit under the NRI term insurance policy will be credited to their NRE or NRO account. As the amount in the NRE account is fully repatriable, all the proceeds may be transferred to the country of residence of the dependents.

If the amount is transferred to the NRO account, then proceeds up to $1 million can only be transferred overseas in a financial year. If the dependents are based in India, then there is no question of remittance abroad.

Now that you know what is term insurance and how it can be beneficial to you even if you’re an NRI, you can look at the different term plans offered by insurance companies in India and select the one that best suits your and your family’s needs.

Clare Louise