Life Insurance in India: Need of Every NRI

Life Insurances 188 views

Just imagine this situation: When a 65 year old woman living in New Delhi, India with her daughter-in-law and grandchildren got a news that her 40 year old-son staying in New Jersey had a major car accident. You can't even imagine her situation as here emotions will move swiftly from immeasurable grief to extreme anxiety. Yes, as now she has to decide whether to to keep her grandson in engineering college, whether to start looking for a new job for her daughter-in-law or whether to sell off the house.

However, the most important thing here is to remember that situation like this can be avoided with just a small amount of foresight. Yes, life insurance for people with dependants is really very important, especially in for those working abroad because the vast physical distance makes the formalities all the more difficult, if you do not have a proper plan.

The Purpose of Your Policy

If you are also an NRI whose parents, spouse and children are living in India, an ideal life insurance policy is the one that covers:

  • Guaranteed regular income for the dependants
  • For you and your spouse wealth maximization
  • Required income to meet children's education

When it comes to life insurance, it is usually complemented by a child plan that allows the education of your children so that it can continue uninterrupted. Moreover, the family will get the lump sum after the death of the parents, and as far as future premiums of the policy are concerned, they are paid by the life insurance company on behalf of the policyholder.

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The Manner of Payment

Furthermore, all individuals belong to Indian origin, whether citizens or not are allowed to get a life insurance policy in India. The person can conduct the purchase from outside the country, but there may be the additional costs in such a case. Moreover, if you are living abroad, the cost of your medical test along with the cost of sending the report to the insurance provider is actually not built into the cost of the policy. And, the payment of the premiums can be easily be made through:

  • NRE/ FCNR bank account (For foreign currency denominated policies issued to NRIs)
  • Remittance in foreign currency
  • NRO bank account (For rupee denominated policies issued to NRIs)

More to the point, if the premiums are paid in foreign currency, it would not be wrong to say that proceeds are fully repatriable, but if it is paid in INR via the NRO account, it would be considered as an earning in India, and is not completely repatriable.

When to Get Insurance

When it comes to getting an insurance, a person should get it when he/she has a steady source of income, secondly when he/she has the dependants who would need to replace income source in case of the demise of the policyholder.  However, if you wait too long to get a policy, age and various other related diseases will make the policy all the more costly for you. If experts are to be believed, a life insurance policy has to give the coverage to a person till the age of 65. In case, the policy is for a short term, it is important to get the coverage for the risky years.

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Where to Get Insurance

Whether an NRI should get the life insurance in his/her country of origin or in his/her country of residence, well it is a topic for debate. But, while making this big decision, you should always keep the below things in mind:

  • The overall cost of the insurance policy varies from country to country. It actually depends upon your life insurance company whether it offers you cheaper insurance in your country of residence or in India.
  • In Indian context, all income from life insurance is tax free, whether in case with death or maturity. Whereas in other countries, this clause may vary. Just like in case with US, wherein the interest is taxable, but principal is not.
  • NRIs are also charged on the same level just like other residents of India, and factors such as age, occupational risk, general health remain the same.

Options Available

There are various different options available for people between the ages of 18 years-65 years. In fact, the sum assured and the policy term is also very flexible. Below are the some major providers in India:

  • HDFC Standard Life Insurance
  • Kotak Life Insurance
  • ICICI Prudential Life Insurance
  • State Bank of India Insurance Plans
  • Max Life Insurance
  • Axis Life Insurance
  • Bajaj Allianz