NRIs can buy term insurance abroad, but here’s what they should know

NEW DELHI: Does a non-resident Indian (NRI) need to be present in India while purchasing a policy? No, they do not. An NRI can easily purchase a policy abroad. In some cases, however, it is better to buy the policy while in India.

This piece looks at things an NRI should consider while buying term insurance abroad.

Rakesh Goyal, director, Probus Insurance, said, "If someone is buying in other countries, the formalities will be a little lengthy. There is significance of the country where the policyholders reside, as the policy's eligibility for buying the policy and premiums depends on that particular factor. If there are countries where there is political instability, premiums would be higher. Many insurers have a list of countries in which their services are not available. So one needs to look at the insurance companies before buying the policy carefully. The policy term can be between six months to 25 years."

Besides, some insurers also provide a whole life policy for NRIs. Some might conduct telemedical examinations, while one must submit relevant documents asked by insurance companies.

Varun Gupta, chief & appointed actuary, Bharti AXA Life Insurance, said, "An individual may be required to do all the necessary medical examinations and share reports with the insurer while opting for a policy. For tests done outside India, generally, the costs have to be borne by the individual."

Besides, if the policy is issued in Indian currency, an NRI can pay the premium through a non-resident ordinary (NRO) account. If the policy is purchased in foreign currency, the policy premium can be paid through their NRE, FCNR account, SWIFT transfer, or an international credit card.

"However, inherently people living outside India have their families back in the country who can ensure that the premiums post-purchase of the policy are paid through the insured's bank account in India," said Gupta. Therefore, it is important to check which currency the policy is issued as the insurer can issue the policy in the currency of the resident country of the NRI or the Indian currency.

Do premiums vary? Usually, premiums do not vary for residents and non-resident Indians. Gupta said, "Premiums are based post evaluation of the risk involved in insuring an individual – health, financial or country-specific underwriting, the last being specifically relevant for NRIs. Hence, if the NRI lives in a country where the risk to life is higher, premiums will automatically be on the higher side."

Claim benefit: Once a term policy is issued, any insurance company in India will cover death irrespective of the country of residence of the NRI. To submit the death claim, the nominee of the policy will have to submit all necessary documents listed by the insurer. Gupta said, “Taxes and tax benefits on the policy are based on the tax laws prevailing in the country that the person resides in.”