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Diaspora

Frequent Questions NRIs mostly have prior to getting life insurance in India

PUNJAB NEWS EXPRESS | April 11, 2024 12:43 PM

Indians whether living in India or abroad see the need to have the best retirement plan in India to financially secure the future of their parents staying back home. When one is making a retirement portfolio, one cannot possibly overlook the importance of an insurance policy. Some of the insurance plans such as ULIP also work best as the NRI investment plans.

If you are an NRI seeking insurance plans, you may have a few questions. Below are some of the most common doubts that deter NRIs from buying insurance or investment plans in India

Can NRIs buy life insurance products in India?

The Foreign Exchange Management Act allows Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) to get life insurance in India. NRIs and PIOs (as defined by FEMA) living overseas can acquire different types of life insurance in India such as term insurance, and ULIP which also happen to be the preferred NRI Investment Plans.

Is it necessary for an NRI to be in India when obtaining a policy?

It is not required for NRI policyholders to be present in India when purchasing the best retirement plan in India. However, it is preferable to purchase the plan after considering all the available options. Although not needed, being present in India when purchasing the plan might be quite useful as you would be able to clear your doubts, if any, directly with the insurance company. If you buy the policy from another country, you must go through all of the medical exams and provide the results to the insurance company. The cost of a medical examination will be borne by the policyholder.

How will I pay the insurance premiums?

The premium for life insurance policy for NRI in India can be paid in any of the following modes:

● Settlement payment in foreign currency.
● Non-resident ordinary bank account.
● FCNR/NRE bank account.

It is critical to check the currency in which the policy is issued at the time of purchase, as insurance providers may issue it in the currency of the NRI's resident nation or Indian rupees. If the policy given to NRIs is in a foreign currency, they must pay premiums in that currency from an FCNR/NRE account located in India. However, if the policy is issued in Indian rupees, premiums can be paid via NRO accounts. However, there are few insurance companies that provide plans that can be paid in foreign currency.

Will the NRI's nation of residency affect the premium amount?

For the same insurance coverage, residents and non-residents often pay the same rate. However, if the NRI lives in a nation with higher life risks, premiums may be on the higher end. A high-risk country is one that is prone to civil or military conflict, has an unstable government, and is subject to frequent violent attacks. Similarly, low-risk countries are distinguished by peace, political stability, and solid law and order. An NRI living in a high-risk nation will pay a higher premium.

What exactly are the rules governing maturity and death payout?

NRI Investment Plans such as ULIPs offered by Indian insurance providers will cover death regardless of where they live in the world. The insurance company will provide a death payout or survival benefit for the specific insurance plan in either rupees or foreign money, as specified in the paperwork. The maturity and death proceeds of an NRI life insurance policy in India are subject to specific restrictions and regulations. The following are the major considerations that NRIs should consider about maturity and death proceeds.

Important Aspects NRI should know

Maturity proceeds: When an NRI's life insurance policy in India matures, the policyholder is entitled to the maturity amount (if applicable), which is the sum assured plus any bonuses. The maturity proceeds are normally paid out in Indian rupees and credited to the policyholder's NRE/NRO/FCNR account.

Taxation of maturity proceeds: Maturity proceeds from life insurance policies in India are tax-free for NRIs if the premiums are paid in foreign currency and the policy is held for at least two years. If the policy has been held for less than two years, the maturity proceeds are taxed in India.

Death proceeds: In the event of the policyholder's death, the nominee or legal heir is entitled to the death proceeds, which include the sum assured plus any bonuses or other incentives. In most cases, death proceeds are paid in Indian rupees and credited to the nominee's or legal heir's NRE/NRO/FCNR account. Death proceeds from life insurance plans in India are tax-free for NRIs, regardless of the policy's tenure or the currency used to pay the premium.

Repatriability of proceeds: It is the ability to transfer funds or assets from a foreign country back to its place of origin. Repatriability is a key consideration when selecting a policy for NRIs and life insurance in India. The maturity and death proceeds of an NRI life insurance policy in India can be fully repatriated as long as the premiums are paid in foreign currency. However, if the premiums are paid in Indian rupees, the proceeds may be subject to some restrictions.

Exchange rate fluctuations: NRIs should be aware that exchange rate variations can alter the real amount received in their foreign bank account. The exchange rate in effect on the day of payment of the maturity or death proceeds will apply.

Inheritance laws: These regulations vary according to the policyholder's country of residency and Indian laws. NRIs should contact a legal expert to understand the inheritance laws that apply to them.

Does it make sense for an NRI to have insurance in India?

After discussing the requirements and regulations for purchasing life insurance in India, NRIs must decide whether they should get best retirement plan in India or not. Several factors must be considered here:

Need to secure the family: Investing in life insurance provides a steady source of income and serves as a safety net for family members. In the case of the primary breadwinner's demise, a regular income plan can compensate for the loss or other uncertainties through a term plan with a return of premium or ULIP, another preferred NRI Investment Plans

Cost and Tax Regulations: An NRI must assess if the policy will be cheaper in the nation of residence. A decision must be made after taking into account all relevant aspects and calculating the cost. Term insurance for NRIs (a type of life insurance) in India is at least 50-60% less expensive than international term policies. NRI life insurance is one of the best NRI plans as it allows you to acquire a large life insurance policy for your family in India at a low premium rate. A life insurance policy's benefits and earnings are tax-free in India, both at death and maturity. The situation may not be the same in the resident country. The NRI must carefully review the tax regulations in the country of residency to determine whether he or she will be required to pay tax on the amount earned.

At last,

While navigating life insurance options in India, NRIs often have several questions. Understanding these, like policy types, medical tests, and tax implications, is crucial for making informed decisions. By resolving these concerns, NRIs can ensure they choose the right plan to secure their loved ones financially.

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