The sudden death of a member of a family can be highly depressing. If the person had dependents or was the sole earning member of the family, it could put such people in financial distress too. In order to help families tackle such difficult situations, life insurance was introduced. Life insurance, today, not only provides financial protection against a family member’s death but is also a form of investment.
A term insurance is the simplest of the life insurance types. It does not have an investment or savings component and is created for pure protection. While Indian citizens purchase such policies, NRIs (Non-resident Indians) may also buy such policies for their family’s financial security. The benefits offered to NRIs will mostly remain the same but some of the costs and procedures may differ.
Read on to find out the features of term insurance for NRIs.
An NRI may purchase a life insurance policy in India if he/she fulfils any of the below-mentioned criteria.
Apart from this, individuals have to fulfil the age criteria laid down by the insurer chosen by him/her. Typically, the age criteria set by most insurance companies are as follows:
The age criteria differ from insurer to insurer.
A medical examination is conducted to screen the individual for habits such as drinking, smoking, any critical health condition, etc. The medical examination will help the insurer determine the mortality of the individual. Hence, a medical examination is essential as well as mandatory. NRIs can choose to get the medical examination done in India or get it done in the country they reside in and send the report to the insurance company. The second option requires the policyholder to bear the costs unless the person has purchased a specially designed NRI policy, in which case the insurer will have tie-ups with medical centres in foreign countries.
The sum assured offered to NRIs could range from Rs.2 lakh to Rs.1 crore. The sum assured amount offered depends on the insurer. The individual may choose any amount that he/she seems adequate to replace his/her loss of income to the family. The sum assured is the maximum amount payable to the nominee of the policy on the life assured’s death.
The premium is a nominal amount of money paid towards the term insurance policy for NRIs to provide coverage against the policyholder’s risk of death. The amount is ascertained based on factors such as the sum assured chosen, the age at entry, policy term, environmental factors, etc.
Since an NRI does not reside in the country to make payments in the branch offices of the insurance company, he/she should ensure that net banking options are permitted by the insurer. Also, it is essential to find out if the premium is to be paid in Indian currency or foreign currency. For rupee denominated premium payments, the person will have to use an NRO (Non-Resident Ordinary Account), and for foreign currency denominated premium payments, the person will have to use an NRE (Non-Resident External Account) or an FCNR (Foreign Currency Non-resident Account). While NRE and FCNR accounts are tax-exempt, NRO accounts attract taxes.
If the premium, due to any reason, cannot be paid on or before the due date, the policyholder can take 15 days or 30 days to pay the same. This grace period is specific to each policy and is decided by the insurer based on the plan type and policy term chosen.
Term insurance policies typically offer coverage for a fixed period of time. NRIs can choose one of the policy term options offered by the insurer. The options could range from 5 years to 25 years. While the policy term is the period during which the life assured’s risk is covered, the premium payment term is the period during which the premiums are required to be paid to the insurer. The premium payment term may be equal to or less than the policy term. The idea of a shorter premium payment term is to let individuals pay premiums for the first few years and enjoy coverage for the rest of the term.
NRIs can choose to renew the policy if he/she wishes to continue the cover. Renewal is done after conducting a sound medical test and making sure that the policyholder has a good track record and has duly paid the premiums throughout the policy term.
The basic documents required for an NRI to purchase a policy are:
These are the major documents that will be required to purchase a term insurance policy. In addition, the insurer may request a few more documents if the policy was purchased through Mail Order Business.
Life insurance for NRIs has become popular of late and the following insurance companies offer plans for NRIs:
Note – This is not an exhaustive list.
Term insurance policies have gained popularity and many NRIs choose to purchase insurance policies from India. It is important for such individuals to do a thorough research and choose the best-suited life insurance policy.