There are many questions on Life Insurance for NRI. I have tried to answer them in this post. NRI Life Insurance is a risk transfer strategy and is a must for any “life” which has economic value. But residency issues make it tough to act & decide.
Here are relevant facts on Life Insurance for NRIs & FAQs (Frequently Asked Questions) on life insurance for NRI customers.
This article is part of a series on NRI Insurance. The details of the series are as below:
This series will cover the following topics on NRI Insurance:
NRI Insurance – An Introduction (Click for Detailed Article)
NRI Life Insurance & FAQs (current article)
Term Insurance for NRIs (Click for Detailed Article)
NRI Health Insurance & FAQs (Click for Detailed Article)
Can an NRI PIO or OCI Purchase a Life Insurance policy or is it mandatory?
Yes, FEMA allows NRIs PIO & OCI to purchase Life insurance policy. For this residency is never an issue.
Purchasing life insurance is not mandatory. It is a self-decision. If you feel your family needs money to fulfill their goals after (unfortunate) you are gone, you need a life insurance policy.
Also please note you are free to get life insurance from an Indian Insurance company, foreign insurance company, or offline or online mode.
Few Indian insurers differentiate between NRI & PIO/OCI. They provide life cover to NRI but not to OCI. One has to check this with company he/she is apply for a life insurance policy.
What are the considerations one must look at while buying Insurance Policy from abroad?
Residency does not stop you from buying a life insurance policy. But insurance companies do consider the country in which you live. There is a difference in the quality of life if you live in Congo or Japan. Premiums may reflect that risk.
A country will history of civil or military unrest, disease spread is high risk and premium will be on a higher level for NRIs living in these countries.
Premium Payment – Life Insurance for NRI
FEMA does not restrict any account for payment of premiums. If the policy is issued in India, it is better to pay through Indian Income (NRI account). In case you do not have an income source in India, you may pay from the NRE account. Some issuers allow payment in forex also so the FCNR account can also be used to pay premiums.
For policies issued by foreign companies, you may pay have to pay premiums in their local currency so NRE or FCNR account can be used.
Claim Settlement for NRI Life Insurance Policies
The claim settlement needs to initiate within 30 days of death for Indian Policies. The claim will be settled in INR. For foreign policies, the time allowance will be as mentioned in the policy documents. The nominee will receive a settlement in the local currency or as mentioned in the policy document.
If the NRI dies on a foreign land, the certificate for death will be required from the high commission or embassy. If death occurs while in India, no such certificate will be required for Indian Insurers. In case you wish to claim in a foreign country with an insurer of that country be aware of the certificates & documents required and arrange for these before making the claim.
Documents for Claim
Which Insurance Policy Should you buy?
Please see this email from an NRI who has crossed 80 years of age.
NRIs are a huge market because of their affluence. So when you are in India, the relatives, the agent from the neighbors surround you – as they have been trained to do so. I am not saying to socialize.
All I am saying is to check before you buy any policy:
Some ground rules:
Insurance is to cover life risk. NOT INVESTMENT.
- Life Insurance contracts are front-loaded (heavy expenses in beginning). So if you close any insurance in the first 5-8 years you will lose more than gains.
- You need a high cover (usually in crores) as life is not cheap. Go for Term Insurance Only.
- Buy as required. If you have all family goals fulfilled and no liabilities – You don’t need insurance.
- Insurance is not inheritance distribution. Instead, provide a meaningful inheritance if you want to leave a legacy.
- Most of us do not need the money back. They are just sweeteners.
Returns from traditional Life Insurance policies are just 3-5%. You can get more than this in India if you invest in other assets.
Still a doubt? I am just an email away – madhupam at the rate thewealthwisher dot com.
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