What NRIs should watch out for while purchasing a life insurance policy

Indians abroad have a wider range of insurance carriers to choose from, both foreign and domestic

A couple of questions which linger at the back of every NRI’s mind are the amount of cover and where to buy the cover? In the country of residence or the country of birth, India. Here in this article, we deal with buying the cover in India. Fortunately for NRIs, restrictions on purchasing insurance policies abroad have been eased.

INSURE 01: FEMA guidelines specifically provide an exception for NRIs in terms of life insurance policies purchased abroad. Photo credit: Pexels
INSURE 01: FEMA guidelines specifically provide an exception for NRIs in terms of life insurance policies purchased abroad. Photo credit: Pexels

Foreign Exchange Management Act (FEMA) makes it very easy for Indians abroad to buy insurance in India. NRIs have a wider variety of insurance options available than the average Indian, being able to choose between both Indian and non-Indian insurance carriers.

All NRIs and persons of Indian origin (PIOs) whether citizens of India or not, are allowed to buy a life insurance policy in India.

According to Mahavir Chopra, Director, Health, Life & Strategic Initiatives at Coverfox, an online insurance broking firm, “The best way to go about buying life insurance for an NRI is by going the online route.”

Talking about the measures some carriers were taking to attract NRI clients, he added, “Insurers have started offering a high sum assured on their pure term plans like Max Life offers a cover of up to INR2.5 crore and HDFC Life offers INR3 crore without any medicals.

On the flip side, the FEMA guidelines specifically provide an exception for NRIs in terms of life insurance policies purchased abroad.

“A person resident in India may continue to hold any life insurance policy issued by an insurer outside India when such person was resident outside India,” it says.

Before taking the plunge, there are certain points an NRI insurance buyer should keep in mind.

Graphic: Connected to India

First, insurance premium rates are the same for NRIs and resident Indians. Contrary to popular belief, insurance companies don’t have a higher rate for NRI customers. All NRIs and PIOs are eligible to purchase life insurance from Indian insurers. They don’t have to worry about the infamous ‘NRI rate’.

Second, the variation in rates for NRIs occur depending on the country they are currently residing in. Premiums are higher for NRIs in high-risk countries, which are generally nations where civil or military unrest is prevalent, the government is unstable or suffering from insurrections and regular terrorist attacks.

The third point to keep in mind is that premium and payout transactions can be in either foreign currency through an NRE/FCNR account or Indian Rupees using an NRO account.

Benefits paid from the life insurance companies will also be in the currency denoted in the policy document. Finally, if death occurs in a foreign country, the insurer will require a death certificate attested by the Indian embassy or High Commission of that country.

Author
Tushaar Kuthiala
Tushaar Kuthiala – Associate Editor

Tushaar has extensive experience as a journalist and in founding two start-up newspapers. He has developed editorial models for both involving editing, both copy and content, as well as writing articles, news reports and fiction. He is a graduate of St. Stephen’s College and earned a post-graduate diploma in TV Journalism from the Asian College of Journalism (ACJ), Chennai. He has worked as a special correspondent based in New Delhi with Daily World, an international media organisation. 

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