Life insurance has been a traditional investment instrument for most Indians and every individual is likely to hold at least one policy, if not more. Undeniably, Life insurance is equally important as other basic requirements of life. It has become a common practice for NRIs to purchase an Insurance cover in India instead of investing in it abroad.The question arises of whether an NRI can invest in an Insurance policy in India?
The answer is Yes, NRIs and Persons of Indian Origin (PIOs) who are residents abroad can purchase life insurance in India. Thus, any person of an Indian origin, irrespective of whether they are citizens of India or not, are allowed to take a life insurance policy in India.
Why NRIs prefer buying Life Insurance in India?
There could be a lot of reasons for NRIs to invest in Life Insurance plans in India even though they do not physically live here. Listing down a few probable reasons why NRIs choose to have their life insurance plan in India –
Life Insurance is an instrument that can easily be purchased in India, by NRIs or a regular citizen. For the ones who have plans to settle broad in a few years prefer buying an Insurance policy in India, much beforehand
The ones who have temporarily moved abroad due to their job opportunities or higher education choose to buy Life
Insurance policies in India
Those individuals who are settled abroad but have their nominees settled in India prefer having their Life Insurance plan in India, since it is viable for the nominee to claim the insurance
Do they have to be physically present while purchasing the Life Insurance Policy?
This is one choice that the insured needs to take individually. There are multiple pros and cons of this feature, for instance, the individual seeking to purchase the policy might incur additional expenses if they choose to purchase a policy in India from another country. Prior to purchasing a policy, the individual might have to undergo a medical examination, post which the reports would be shared with the Life Insurance Company in India.
How are the premiums paid?
In case of an NRI who is sourcing his/her income from India as well as the other country, they are qualified to be an NRO (Non Resident Ordinary Account). At the same time, if you have an NRO account, you can utilize it to make the payment of your premium. Adding to it, in a scenario like this, the account type could either be a savings account, a current account or in the form of fixed deposits and the money can be deposited from any part of the world or India.
If you are an NRI who wants to buy a Life Insurance Policy but wants to refrain from taking any financial risks, then you qualify under Foreign Currency Non-Resident Account i.e. FCNR. In this scenario, you can make use of any currency, but here it is preferable to use fixed deposits to pay your premiums. This way you will be exempted from all tax deductions in this framework.
An NRI can also consider purchasing a term life insurance policy which practically guarantees protection of the insured person’s family members in case of sudden demise. Barring a few differences, the features of a term life insurance policies as against whole life insurance policies remain somewhat similar for NRIs as well as residents.