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Term Insurance for NRIs in India



Life as an NRI means best of both World’s. You enjoy a great life abroad. You are welcomed in India. However the rules don’t change. You still need term life insurance if you are newly married or have children. An NRI must avail a term insurance plan.

Know term life insurance

In this policy you pay a premium (a fixed sum of money) to the life Insurer. You pay this amount for a fixed time period called tenure or term of the policy.

If you (policyholder) die :
Spouse and children get the sum assured (a lump sum) amount.

If you (policyholder) survive : No money is paid to you or your family.

Can NRI’s purchase term life plans in India?

Yes, NRI’s can buy term life plans in India. If you are an NRI and travel a lot between India and the country you reside in, you can purchase the term life plan when you are in India. Medical tests are very important for a term life plan and you can do your medical tests when you are in India. The cost of the medical tests is borne by the Life Insurer. (Costs of medical tests are paid for in the premium.)

Term life plans purchased in India are valid worldwide, and if you (policyholder) die abroad your family gets the sum assured (A lump sum payment is made to them.) NRI’s pay the same premium as ordinary Indian citizens if they purchase the term life insurance plan in India. If the NRI resides in a country which is considered dangerous then the life Insurer will charge a higher premium.

Can you purchase the term life plan if you do not come to India?

Yes, if you stay abroad and your family resides in India you can purchase the term life plan. You can write (or contact) the life Insurer in India and purchase the term life plan.

You will have to do your medical tests abroad and send the reports to the life Insurer in India. You will have to pay for the medical tests yourself as the life Insurer in India will not bear the cost of the medical tests.

You can insure yourself under a term life plan only for a maximum sum assured of INR 1 Crore if you buy the policy abroad. You can insure yourself for a much higher sum if you buy the term life insurance policy in India and your medical tests are conducted within the country.

How can you make the premium payment for the term life insurance plan if you reside abroad?

NRI’s can purchase term life insurance in India where the sum assured is paid either in Indian rupees or in a foreign currency.

If the sum assured is paid in a foreign currency then the premium is collected by the life Insurer in the foreign currency. You can make the payments abroad from your NRE/FCNR bank account.

If you are purchasing a term life plan denoted in rupees you can make the payment from your NRO account. If you make the premium payment for the term life plan from your NRO account the death benefits from the term life plan will not be repatriable. (Will not be sent abroad.)

Should you buy a term life plan in India if you plan to permanently settle abroad?

The premiums for a term life plan are cheaper in the developed countries of US, UK and Australia. You could get a higher sum assured for a lesser premium. If you plan to settle abroad permanently with your family you must take a term life plan in the country where you plan to settle, say the US, UK, Australia or other developed countries.

The premiums are cheaper in these countries because of better mortality data which is updated regularly. (Maybe once a year). The insurer is confident of the mortality data available to him and can easily price the term life plan on the lower side. You get the benefit of a cheaper premium on the term life plan. Life insurers in developed countries use customer segmentation (Slot customers into categories) while fixing the premiums for the term life plan.

The customers who have good credit (repay their credit card bills and loans on time) and enjoy good health (Their medical records can be assessed) enjoy lower premium than other customers. These customers are called preferred lives.

An excellent financial inclusion system means the life insurer can price the premiums on the term life plan very low. In India mortality data is outdated and not accurate. The Insurance commitment is made in good faith. (Life Insurers rely on data which you fill up in the form) and have no method to verify data. This means you pay a higher premium on the term life plan.

In developed countries a large number of people insure themselves and this means a greater insurance pool and a lower premium for your term life plan. Yes…being an NRI means having your cake and eating it too. So if you are an NRI, buy that term life plan and rest easy as your family is well taken care.

Insurance
Term Insurance