Steps for NRIs to purchase policies in India and key considerations

New Delhi: There exist certain misconceptions surrounding the acquisition of life insurance policies for Non-Resident Indians (NRIs). Some mistakenly assume that purchasing a policy from an Indian insurer is a challenging endeavor, while others may be unaware of the correct steps to follow.

As universally acknowledged, life is brimming with uncertainties, and maintaining sufficient life insurance coverage, regardless of one's place of residence, offers reassurance to one's family members. While there are certain factors to take into account when acquiring the policy, we aim to clarify essential aspects for NRIs seeking to independently secure insurance coverage in this article.

Process for NRIs to acquire life insurance policies

Indian insurance firms extend life insurance policies to NRIs residing in any global location. The Foreign Exchange Management Act (FEMA) empowers NRIs and People of Indian Origin (PIO) to acquire insurance plans customized to meet their family protection needs.

Residing in India is not a mandatory requirement for individuals to buy coverage from Indian life insurance companies. However, certain insurers might stipulate that you must be in India when obtaining the policy. For NRIs, one of the most efficient and user-friendly methods to secure insurance is through online platforms. Here, they can easily compare policy features and premium rates before making a purchase.

An advantage of obtaining insurance in India is that insurers typically cover the cost of necessary medical examinations for policyholders. Conversely, if the policy is purchased from a different part of the world, the policyholder may be required to provide all their medical records to the insurer, and these expenses may not be covered or reimbursed.

Furthermore, it's crucial for policyholders to grasp that premium rates are solely determined by their country of residence. If policyholders live in regions deemed high-risk, they can expect higher premiums or even potential denial of coverage. Conversely, policyholders residing in countries with low-risk ratings can typically secure the policy without significant hurdles. High-risk countries often face political instability and a higher likelihood of civil conflicts or frequent violent incidents affecting their residents.

Within the country, there exists a multitude of insurance providers, each with its own set of pros and cons. It is imperative for individuals to exercise prudence when choosing an insurance company. Prior to finalizing a policy purchase, policyholders should thoroughly examine its inclusions and exclusions.

Another vital factor to take into account is the taxation of life insurance policies. Currently, investment growth and policy maturity proceeds are tax-exempt in India. However, it is essential to consider the tax regulations of the country where one resides when purchasing a policy.

Premium payments can be made in foreign currency or through various Indian bank accounts, including the NRO (Non-Resident Ordinary) account, NRE (Non-Resident External) account, or FCNR (Foreign Currency Non-Resident) account. The policy documents will specify whether premiums should be remitted in Indian rupees or foreign currency.

If the life insurance policy is denominated in a foreign currency, the premiums must be settled in the same currency through either an NRE or FCNR account. On the other hand, if the policy is issued in Indian rupees, premiums will be collected via an NRO account. Regarding final maturities, as stipulated in the policy documents, they will be disbursed in the specified currency.

In the event of a death claim, the nominee will need to furnish all the necessary documents outlined in the policy documents. It's important to note that if a death occurs in another country, certain insurers may require a death certificate authenticated by the Indian embassy or high commission in that respective country.