How Much Term Insurance Cover Does an NRI Need?

What is the Need for Term Insurance for NRIs? 

Here is a list reasons that why should NRIs need term insurance plans: 

• Financial support for dependents in India: Your family back home, including parents and siblings, may be financially dependent on you. The life cover should be large enough to sustain their lifestyle and long-term needs.

• Overseas financial liabilities: You may have loans, such as a home loan or a car loan, in your country of residence. Your term insurance payout should be able to clear these debts.

• Cost of living and inflation: The money paid out in India must keep up with the rising cost of living and inflation to provide a stable financial cushion for your family.

• Foreign currency conversion: The sum assured, paid out in Indian Rupees, should be sufficient to meet your family's needs after considering currency conversion rates.

What is the Formula to Calculate Your Ideal NRI Term Cover? 

To get an accurate estimate of your required life cover, you can use this simple yet effective formula:

Cover Amount = (Annual Expenses x Number of Years) + Liabilities + Future Goals - Existing Savings

Suppose an individual with an annual expenses of ₹7 lakh wants to financially secure their family for the next 20 years. He has the outstanding liability of car loan amounting ₹5 lakh. He also wishes to provide ₹20 lakh for future financial goals such as their children’s education and marriage. Moreover, the individual already has existing savings and investments worth ₹10 lakh. 

Using the formula, the total life insurance cover required would be:

(₹7,00,000 x 20) + ₹5,00,000 + ₹20,00,000 - ₹10,00,000 = ₹15,500,000

What are the Benefits of Buying NRI Term Insurance in India? 

Given below are some of the benefits of buying term life insurance plan from India: 

• You can buy term plans 40-50% more affordably than international policies. 

• Term insurance for NRI in India provides coverage up to 10 crores in the absence of policyholders. It ensures that your loved ones are financially protected. 

• You can save an additional 5% on the premium if you choose an annual mode of premium payment. 

• The policyholders can exit their policy before maturity and receive back the premiums paid. 

• NRI policyholders also have an advantage to claim 18% GST waiver on the premiums paid through non-residential external bank accounts. The bank must support freely convertible currency. It acts like a proof of residence to claim the benefit in the country where you are living. 

• You can apply for term insurance remotely. You can even undergo a medical check up through VMER or telemedical. 

What is the Eligibility Criteria to Buy NRI Term Insurance in India? 

Individuals residing in India can apply for NRI term insurance plans. The minimum age to buy the policy is 18 years. Eligible applicants include:

• Non-Resident Indians: Indians who reside in other countries with a valid passport. 

• Overseas Citizens of India/ Persons of Indian Origin: Married Indians or foreign citizens whose Indian parents/ grandparents live there and individuals who once had Indian passports.

• Foreign Nationals: Foreign citizens who are now residing in India. 

What are the Documents Required to Buy NRI Term Insurance Plan in India? 

Here’s a list of documents that are required to buy NRI life term insurance plan in India:

• A valid passport along with an attested copy for both the policyholder and the proposer. (required only if they are different)

• Duly filled policy proposal form or the online application form. 

• Policyholder’s health status with all the medical check-up reports and documents. 

• Income proof and Tax Residency Certificate copy. 

• Age and address proof 

• Foreign nationals must have an OCI card or its substitute. (A valid Indian work visa may also applicable)

• The first installment of premium. 

Note: You can calculate the premium using an online tool known as term insurance premium calculator on PolicyBazaar. 

What are the Factors NRI Must Consider When Buying a Term Insurance Plan? 

There are many factors that you must consider when purchasing an NRI term life insurance plan. Some of these factors include: 

• Sum Assured and Financial Goals 
  Inflation is rising without a gap and your family’s needs will increase over time. Thus, you must select a coverage amount that helps you combat inflation and maintains your standard of living. Make sure that you consider the plan that also provides coverage for critical life milestones like children education and outstanding loans. 

• Policy Tenure 
  Another major factor that you must consider while purchasing life insurance for NRI is the policy tenure. Ensure that you choose a duration that aligns with your financial goals. The ideal NRI life term insurance plan should cover your entire professional life.

• Insurance Provider 
  While buying a NRI life term insurance plan, ensure that you check the claim claim settlement ratio (CSR) and solvency ratio of the company. A claim settlement ratio indicates the claim settlement record of an insurance company. Whereas, solvency ratio refers to the overall financial health of the company.

• Riders & Add-ons 
  Term insurance companies provide additional benefits known as riders to policyholders to expand their coverage. The policyholders can purchase add-ons like critical illness coverage, accidental death benefits, waiver of premium for disabilities and more by paying an extra premium. 

  
  Be careful while choosing the right add-on for your NRI term insurance plan as it will increase your premium. Make sure that you select the riders that suit your needs. 

• Personal Factors: 
  Your age and health also play a major role in the purchase of  term life insurance for NRI. Early age policyholders usually pay lower premiums as compared to older individuals. Why? This is because older individuals are highly vulnerable to critical illnesses and they are more likely to claim their policy.

Wrapping Up!

Term insurance for NRIs needs to cover more than just income. It should be enough to pay off any loans in both your home country or abroad, and cover your family's daily expenses and future goals, like your children's education. It's a good idea to aim for a cover amount that is about 15-20 times your yearly income, while also taking into account your current savings. You can easily purchase NRI term insurance through PolicyBazaar. However, make sure you consider the important factors like age, insurance company, and others while purchasing the policy.

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