Imagine this scenario: A 67 year old woman,who lives in India with her daughter-in-law and grandchildren, has received news that her 53 year-old son living in New York has had a car accident. Her emotions will move swiftly from immeasurable grief, to extreme anxiety—about whether to keep her grandson in engineering college, whether to start looking for a job for her daughter-in-law, whether to sell off the house.
The most important thing to remember is that situation like this can be avoided with a small amount of foresight.Life insurance for people with dependents is absolutely essential, and even more so when they are working abroad, because the vast physical distance makes formalities all the more difficult in the absence of a proper plan.
The Purpose of Your Policy
For an NRI with parents, spouse and children living in India, an appropriate policy is one that covers:
- Regular guaranteed income for dependents
- Wealth maximization for your spouse and yourself
- Income to meet children’s education
Life insurance is often complemented by a child plan which allows the education of your children to continue uninterrupted. The family gets a lump sum upon the death of the parent, and the future premiums of the policy are paid by the insurance company on behalf of the policy holder. ICICI Life Insurance provides Pru Smart Life plan for your smartkid.
The Manner of Payment
All persons of Indian origin, whether citizens or notare allowed to take a life insurance policy in India.The person may conduct the purchase from outside the country, though there may be additional costs in that case. If you are abroad, the cost of your medical test and the cost of sending the report to the insurance provider is not built into the cost of the policy. The payment of premiums can be made through:
- Remittance in foreign currency
- NRO bank account (For rupee denominated policies issued to NRIs)
- NRE/ FCNR bank account (For foreign currency denominated policies issued to NRIs)
If the premiums are paid in foreign currency, then the proceeds are fully repatriable(can be sent from India to the NRI’s location) but if is paid in INR through the NRO Account, then it would be considered as an earning in India and not fully repatriable.
When to Get Insurance
A person gets insurance when he has, first, a steady source of income and second, dependents who would need to replace that source of income in case of the earner’s demise. Again, if you wait too long then age and related diseases will make your policy more expensive.Experts believe that a life insurance policy has to cover a person till the age of 65. If the policy is for a lesser term, then the risky years are not covered.
Where to Get Insurance
Whether an NRI should get insurance in the country of origin or in the country of residence, is debatable. While making this decision, you should keep in mind that
- Overall cost may vary from country to country. Whether it is cheaper to get life insurance in your country of residence than in India depends on your insurance provider.
- In India all income from life insurance is tax free, whether as a result of death or of maturity. In other countries this may not be the case. In US the principal is not taxable but the interest is.
- NRIs are charged on the same level as resident Indians, other factors (age, general health, occupational risk) remaining the same.
Different policies are available for people between ages of 18 years to 65 years. Policy term as well as sum assured is also highly flexible. Some of the major providers in India are:
- ICICI Prudential Life Insurance
- Bajaj Allianz
- State Bank of India Insurance Plans
- Kotak Life Insurance
- Axis Life Insurance
- HDFC Standard Life Insurance
- Max Life Insurance
You may also like to read: NRIs Buying Life Insurance In India: 5 Points To Ponder