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How to deal with your LIC policy when going abroad

The Life Insurance Corporation of India (LIC) offers various flexible provisions to ensure that its policyholders can benefit the most from a life cover. The company has various special provisions when it comes to offering coverage for non-resident Indians (NRIs) or people of Indian origin living in other countries. If you are an LIC policyholder who is thinking of moving abroad, you must review your existing life covers to check if there are any alterations to be made. Before discussing the ways to deal with your policy, let’s take a look at the general guidelines regarding coverage for NRIs.

LIC’s regulations for NRIs

Some of the general guidelines regarding life insurance coverage for NRIs are listed as follows:

• A person must be a citizen of India in order to get life coverage from LIC. In other words, a person applying for LIC policy must not have a green card or citizenship in another country. Also, the person must not have applied for citizenship in another country.
• The company must be notified if an applicant is planning to acquire citizenship in another country.
• People of Indian Origin (PIOs) having foreign citizenship and living in foreign countries shall not be treated as NRIs for the purpose of insurance. As per the guidelines, PIOs have limited access to LIC policies (proposals under medical schemes) only during their stay in the country.
• A life cover taken by citizens in India will continue even when they travel abroad or reside in other countries. Both death and maturity benefits will be paid as per the terms of the policy cover.
• NRIs living in other countries can subscribe to LIC policies without even having to visit the country. In this case, all formalities regarding the policy can be completed through a process called ‘Mail Order Business’.
• NRIs can pay for their insurance premium in Indian Rupees through NRE or NRO (Non Resident Rupee or Non Resident Ordinary Rupee) accounts. The proceeds from these policies will be paid only in Indian Rupees and they cannot be repatriated.
• NRIs can also pay premium in foreign currency through online transactions. In this case, the proceeds from the insurance policy can be repatriated and collected in foreign currency.
• The premium amount charged by LIC remains the same for both Indian residents and NRIs living in other countries.
• NRIs are eligible to take all kinds of LIC policies subject to certain restrictions. For instance, certain sum insured limitations may be imposed on term insurance covers taken by NRIs. Also, critical illness benefit is not granted for these policyholders.

Notifying the company

If you are an existing policyholder moving abroad, it is better to intimate the company regarding the relocation. Though it is not mandatory to inform the company, policyholders can get certain benefits by keeping the company in the loop. If the company is already notified, it will be easier to do the paperwork during the time of a claim. The company can be notified by visiting the home branch where you have purchased the policy.

An NRI questionnaire will be given by the company while notifying about the relocation. It asks for various details like purpose of visit, duration of stay, passport number, source of future premium payments, etc. Once these questions are answered, the company will process the application and make necessary alterations to the policy. If you have multiple policies with LIC in different branches, it is important to notify the respective branches of this relocation.

Tax regulations

Any proceeds from an LIC policy (death or maturity) are exempt from taxes in India. However, this may not be the case in policies for NRIs. If the proceeds are withdrawn in foreign currency, it may attract tax in a foreign country. NRIs must check the regulations in their country of residence while withdrawing the proceeds from their insurance policies.

Things to consider

Before moving abroad, those who have LIC policies must consider the following things:

• Term insurance holders must consider various factors like their age, duration of stay, health condition, etc., before deciding on their insurance coverage. If a policyholder is staying abroad temporarily or has family in India, it is better to keep the cover active.
• Factors like inheritance tax (in case of death proceeds) in the country of residence must be taken into consideration.
• If you are thinking of surrendering your policy before you relocate, you must consider the charges associated with it.

Conclusion

LIC policies are among the most favoured investment tools for Indians. Since LIC policies provide coverage anywhere in the world, there is no reason to surrender your policy unless you plan on giving up Indian citizenship altogether. LIC also operates an NRI center to assist policyholders living in another country. If you have any further doubts on how to deal with your LIC policies while moving abroad, you may consult a financial advisor to evaluate the overall impact of your relocation.