Why Should NRIs Buy Term Life Insurance In India?

Various companies offer customized options that might interest NRIs. Term insurance plans offered to NRIs are mainly available online and they do not require you to undergo a medical examination. Let’s understand the term life insurance plans for NRIs in India. 

Why Should an NRI Buy a Term Life Insurance in India? 

Every person in the universe thinks about his/her family protection in case of his/her absence. If as an NRI, one is the sole earning member of the family, the feeling of being protected and secured makes him/her more confident and ready for the future. It is very easy for an NRI to buy an online term life insurance policy. As per RBI i.e.  Reserve Bank of India, the premium amounts should be received using proper banking channels when making transactions outside India. However, why an NRI needs to buy a term insurance plan. Here’s a quick laydown: 

• Financial Support – Every individual who is bearing all the financial liabilities towards his/her family should consider the fact that how will the family cope with the critical situation if something happens to him/her. From the expenses related to the household to the education of children, everything can hit at the same time when the earning member dies. So, it is very important to take precautions to avoid financial instability in such cases. Term insurance is a pure protection plan that provides support to the policyholder’s family in case of his/her absence. 
• Cost-effective – One can purchase a basic term insurance plan for a fixed tenure at nominal premium rates. If anything happens to the policyholder during the policy term, then the nominee/beneficiary will receive the sum assured (SA) as a lump sum amount or as monthly installments, or as a combination of both. For NRIs, it is advisable to buy a term insurance plan at a young age so that when he/she comes back to India in his/her retirement years, he/she will be protected for his/her twilight years. 
• Tax Benefits – All the premium amounts are tax-deductible for NRIs under Section 80C. The received sum assured amount is also exempted, subjecting to the terms and conditions U/S 10(10D) of the Income Tax Act, 1961. 
• Payout On-time – In case of death during the policy term, the nominee/beneficiary can receive his/her claims quickly and smoothly provided the nominee to complete all their claim formalities. As per IRDAI, every company must pay all the claims that were made 3 years after the commencement date of the policy. 
• Flexibility – Term life insurance plans provide policyholders the flexibility to select how the proceeds should be distributed in case of demise.  Few term insurance plans provide a monthly option of payout in which the SA amount can be given as a family income benefit. It allows regular cash flow to all the loved ones or family members. One can also choose funds as per his/her requirements and also based on his/her risk appetite and financial goals.  
• Liquidity – Under these plans, one can withdraw fully or partial amounts from his/her savings in case of need, irrespective of premium paying term or policy term. 
• Grace Period – If in case one misses out or fails to pay a premium on time, then a grace period is offered to the policyholder to pay the premiums. For a plan with a PPT frequency of six months, 15 days of grace period is applicable. 
• Renewal of Policy – Some term life insurance policies offer policy renewal options at the time of maturity. In this, some tests are required related to health to meet the standards of renewal. 

Does Residential Country Affect the Premium Amount of NRIs? 

As we have discussed, the premium amount is the same for NRIs and Indian Residents for the same term life insurance plan. However, if in case an NRI is living in a country where the risks related to life are higher, then premium amounts are higher. Now, what is a high-risk country? A country that is susceptible to military or civil issues or has an unstable government and continuously facing violent attacks. Likewise, low-risk countries are classified by stability in their governance, peace, and good state of laws. An NRI who lives in a high-risk country is subjected to a high premium charge. 

How Can the Premiums of Insurance Plans be Paid? 

The premium amounts for NRI’s in India are payable through different modes: 

• In foreign currency 
• Non-resident bank account 
• FCNR/NRE bank account 

It is very important to keep a check in the currency in which the policy is issued as the insurers issue them in the residential currency of the NRIs or Indian Rupees. If the policy that is issued is in the foreign currency, then they are required to pay a premium in that currency only from FCNR/NRE account in India. Whereas in case the policy is issued in Indian currency, premium amounts can be paid via NRO accounts. 

Documents Required to Buy an NRIs Term Plans 

For NRIs, the geographical restriction is one of the main concerns before purchasing term life insurance. An NRI doesn't have to be present in India while buying a term life insurance plan. However, if in case of medical examination, it will be performed at the insured’s expense if he/she is out of India at the time of policy commencement. The premium prices are similar for residents and NRIs when the involved risks are the same. The premium will only increase if the risk associated with policy also increases. 

• Proof of age 
• ID Proof 
• Proof of Address 
• Proof of Income 
• Photograph 
• Questionnaire for an NRI 
• Passport copy with entry and exit details

Wrapping It Up! 

An NRI should buy a term life insurance policy to secure his/her loved one’s future objectives in case of his/her demise during the policy tenure. The premium available on insurance plans is variable, i.e. depending on the terms and conditions, features, and benefits of the policy. It also depends on the frequency of premium payment terms, health conditions, age, etc. The duration of the plan also varies based on the insurance products offered by different insurance companies in India.