Top 5 Factors to be Considered by NRIs Before Buying a Life Insurance Policy in India


5 min read

Updated on Apr 26, 2023

Buying a life insurance policy is one of the most traditional ways of investing money. There are NRIs who also want to invest in life insurance but are not sure how can they do it.  Well, life insurance for NRIs in India is very much possible and easily available. It is a smart move for them especially due to the tax deductions that they are entitled to if they are filing income tax in India. However, certain factors need to be considered by the NRIs before they purchase a life insurance policy in India. Let us check them out today.

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1.You Must Check Your Eligibility Before Buying a Life Insurance Policy

There are life insurance policies for NRIs but they need to fulfill some conditions.  The conditions are as follows:

  • The individual must have had an Indian passport in the past
  • Either the individual or any one of the parents or grandparents needs to be a citizen of India as per the Citizenship Act, 1955 or the Constitution of India
  • The policy buyer is the spouse of an Indian citizen.

You need to ensure that to buy a life insurance policy in India; you need to have a valid Indian passport that has been issued by the Government of India or that you fall in any of the above categories.

2.You Can Choose Your Life Insurer

Once you find out that you are eligible for buying a life insurance policy in India, the next step for you is to choose an insurance company in the country. This can be a little confusing since you will come across as many as 23 insurance providers and many of them offer a wide range of products. To get started with the process, you should begin by checking the claim settlement ratio of the company. This will give you an idea about the chances of your claims being settled when you make one. While doing so, you also must check the track record of the company. You can also take help of the online reviews to get an idea of this. And trust on this, that not all the reviews that you see online are paid.  Some of the insurance companies have restructured the process of issuance of insurance policies to the NRIs. You can get help from them whether it is for documentation or medical tests.

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3.Know About the Mode of Payment

You must make it a point to know about the mode of payment so that you do not have to face any kind of trouble later. There are two types of policies available to the NRIs. The first one is the rupee-denominated policy in which the policyholder has to pay premiums in Indian rupees by using his/her NRO accounts. The other one is the foreign currency-denominated policy in which the premiums are paid in foreign currency through the NRE/FCNR account of the policyholder. Mentioned herein below is the table that shows the comparison between NRO, NRE, and FCNR accounts.

Criteria Non-Residential External Account (NRE) Non-Resident Ordinary Account (NRO) Foreign Currency Non-Resident Account (FCNR)
Account type Savings, Current, Fixed Deposits Account Savings, Current, Fixed Deposits Account Fixed Deposit
Suitable for NRIs whose income source is only from abroad NRI who earns from both India and abroad NRIs who want to invest in India but are not in a mind to take currency risk
Currency of money deposit Rupees Rupees Canadian Dollar, US Dollar, Australian Dollar, Euro, Pound Sterling
Money can be deposited from Abroad Abroad and India Abroad
Tax Exempt Taxable Exempt

Read More: Do Multiple Life Insurance Policies Make Sense

4.Find Information About the Medical Examination Process

When you buy a life insurance policy, you need to undergo a medical test. However, to get it done, you can choose either of the two ways. As per the first step, you can come to India and the medical expenses will be borne by the insurance company. The other option is to get it done abroad and once you receive the report, you can send it to your insurer. In the case of the second option, the cost of the medical test has to be borne by the policy buyer, until and unless they are purchasing a life insurance policy specifically for non-residents.

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5.Find Information About Taxation

Before you buy a life insurance policy in India for NRI, you need to consider the tax laws in India as well as the country that you are living in. You should check for tax implications at all three stages of the policy cycle, which include investment, accumulation, and maturity. While under the current tax in India, all the three stages are exempted, you need to ensure that it is the same in your country too. You can also consider discussing the same with a specialist who can clear all your tax-related queries before you decide to buy a particular life insurance policy in India. Buying a life insurance policy from India can be affordable as well as easily understandable. You must check your options thoroughly before concluding and investing in a policy.

There are quite many life insurance companies and the policies that are offered by them. To find the best life insurance policy in India for NRI, you can browse through the various websites on the internet. You can certainly find all the required information online and accordingly take your decision about the policy that you would like to buy.

Best Term Life Insurance Companies

Best Term Life Insurance Companies

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FAQs on Life Insurance Policies for NRIs

What are the tax implications of buying a life insurance policy in India for NRIs?

As an NRI, you would be subject to varying tax rules and regulations in India depending on your residency status. If you are deemed a resident of India for tax purposes, the premiums you pay for a life insurance policy may be eligible for tax advantages under Section 80C of the Income Tax Act. But, if you are a non-resident, you may not be eligible for these tax breaks. Also, any policy payouts may be taxed in India.

What are the benefits of buying a life insurance policy in India for NRIs?

In India, life insurance plans may give a number of advantages, including financial protection for your loved ones in the case of your untimely death, as well as savings and investment opportunities. Certain policies may additionally provide other benefits like as critical sickness and accidental death coverage.

What should NRIs consider when choosing a life insurance policy in India?

When choosing a life insurance policy in India, NRIs should consider factors such as the reputation and financial stability of the insurer, the terms and conditions of the policy, the premium payment options, and the benefits provided by the policy. It's also important to consider the currency exchange rates and any fees or charges associated with the policy.

What documentation is required for NRIs to buy a life insurance policy in India?

NRIs may be asked to submit documents such as a copy of their passport, proof of income, proof of domicile, and any other paperwork requested by the insurance agency in order to purchase a life insurance policy in India. NRIs may also be needed to undergo a medical exam or provide a health declaration form, depending on the kind of insurance obtained. It is crucial to verify with the insurance company to see what paperwork is required.

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Jun 21, 2022
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PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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