Most Indians still believe that traditional investment methods are the best, with life insurance ranking at the top of most lists when it comes to choosing NRI Investment plans. 

NRIs (non-resident Indians) and people of Indian origin (PIOs) can choose from a variety of life insurance plans available for purchase in India under the Foreign Exchange Management Act (FEMA). This allows NRIs to purchase term insurance and other life insurance policies regardless of whatever nation they are in. Premiums can be paid in an NRO bank account, an NRE/FCNR bank account, or foreign money, using the currency specified in the issued life insurance policy.

Do you think this is the only information NRIs should know when choosing NRI plans? There are other aspects of it that are equally important and this is what we have covered in this article. 

NRI & Insurance

Before we get into NRI insurance, let us first define NRIs (Non-Resident Indians). An NRI is described as a citizen who

• Has resided in India for less than 182 days in the previous fiscal year.
• Stays out of India for employment reasons.
• Staying outside India for vacation or business purposes
• Stays outside of India for an undetermined length.

Every individual requires insurance, which is why Indian regulations allow NRIs to acquire a life insurance policy in India. The Foreign Exchange Management Act of India (FEMA), 1999, allows NRIs to obtain insurance policies in India. Insurance coverage for NRIs is customizable, allowing them to meet a variety of financial demands. NRIs can use these plans as part of their NRI plans to protect themselves and their families during times of financial crises. 

Key Factors to Consider for NRI choosing to purchase Life Insurance in India

Medical cost: NRIs can purchase term life insurance abroad. However, if they do so, they will be required to undergo a medical examination overseas and submit the results to the insurer in India. In this instance, the NRI bears the cost of medical exams. However, if the NRI is in India throughout the purchasing procedure, the insurer must cover the additional expense of a medical checkup. If the individual is located outside of India, such as in the UAE or Singapore, insurers such as Tata AIA Life Insurance Company Ltd and HDFC Life Insurance Company Ltd can only sell the insurance if the NRI is willing to pay for his own medicals, which are often highly expensive. As a result, if NRIs purchase the policy while in India, they will avoid having to pay for the additional medical examination out of pocket. In India, the insurer often bears the cost of the medical checkup.

Policy cost: NRIs must conduct a thorough study before purchasing a policy or choosing any NRI Investment plans. They should examine the insurance cost by determining if it is cheaper to purchase a policy in their native nation or abroad.

Taxation: When you purchase term insurance in India as part of your NRI investment plans, you receive various benefits from the coverage. Premiums paid, maturity, or death benefits are typically treated as tax-free income under Indian income tax rules under Sections 80C and 10(10D) of the Income Tax Act, subject to certain conditions and this is one of the reasons why life insurance comes under the NRI plans. However, NRIs may be required to pay taxes on income obtained abroad. The taxability of overseas income is determined by the current tax legislation in place abroad. As a result, NRIs must consider tax provisions in their place of residency. If NRIs provide a valid Form 10F and a Tax Residency Certificate (TRC), there will be no deduction of Tax at Source (TDS). Checking for tax implications at all three stages of the policy life cycle – investment, accommodation, and maturity – is one of the main criteria when investing in life insurance for an NRI or keeping it under preferred NRI plans. 

Policy Tenure: When acquiring term life insurance in India, NRIs must first decide on their tenure. NRIs can choose a policy duration of 6 months to 25 years. Most insurers today offer whole-life insurance coverage to NRIs.

Coverage: When acquiring term insurance, NRIs can select the type of coverage or sum assured that they prefer. Selecting an appropriate amount for your family is important. You must guarantee that the payout helps them cover certain anticipated expenses or any debts you may leave behind

How to Get Life Insurance?

NRIs can buy life insurance via two methods. They can purchase a term plan while in India or from their home country. Let’s see how each procurement procedure works.

While in India

Purchasing a life insurance plan for NRIs in India is quick and simple. The NRI merely needs to choose an insurer and request to purchase the policy. Once the paperwork is completed, the insurance is classified as a standard term plan acquired by Indian nationals. However, NRIs must disclose their nation of residence. Most insurers have a list of countries where they will not provide insurance. Furthermore, if the NRI lives in an unstable political environment, they may bear the cost of higher premiums.

From the Country of Residence

The process of purchasing life insurance for an NRI from abroad is somewhat cumbersome as they will be required to purchase the policy from a mail-order business. The process requires the NRI to be verified by both a notary and an Indian diplomat. The majority of NRIs require certification from an Indian embassy official. 

Bottom line.

To purchase life insurance, NRIs should first check their eligibility and then compare several policies online to find reputable insurance. They should have a thorough understanding of the medical examination procedure and the numerous tax regulations in existence in India, as well as the location where the person resides.