Mahesh, aged 35 years, an unmarried NRI, staying in the UK for 5 years. He was hale and healthy but lost his life in a terrible accident in the UK, on an unfortunate day. His parents lived in India and he was their only son. Mahesh also had a younger sister who was still studying at the time of his death. The loss of their son has put life of Mahesh’s aging parents into an emotional turmoil. However, they were saved of the financial turmoil, thanks to the term life insurance cover of Rs. 1 crore that Mahesh had bought when he was 25 years old for a policy term of 25 years. As the term insurance was valid outside India too, his parents received a sum assured of Rs. 1 crore that could cover their daughter’s future expenses.
An Indian citizen who is relocating to another country or moving abroad temporarily for a year or two might wonder if their term insurance is valid outside India. The answer is Yes - their term insurance is valid outside India even while they are abroad, but subject to certain terms and conditions of coverage. If a term policy’ insured dies outside India during the policy term, the nominee is entitled to receive the death benefit compensation as per policy guidelines. Although, there is no particular documentation required from the insurer when the policyholder goes abroad on a personal or professional assignment, it is advisable to notify the insurer’s home branch about his relocation.
Can NRIs procure a term insurance policy in India?
An NRI (Non-resident Indian) is defined as an Indian citizen who has been living abroad for employment, business or on any other purpose, or an Indian citizen who resides in India for less than 182 days during the course of the preceding financial year. Here are some key points to be kept in mind about term insurance for Indians relocating to another country or Non-resident Indians (NRIs):
- At the time of policy purchase, the policyholder must be an Indian citizen. This shall ensure coverage to the insured, even when he travels or stays abroad for the purpose of employment or education.
- The policyholder must not have applied or must not be planning to apply for citizenship on foreign soil in the near future.
- However, an NRI who has no term insurance policy in India while relocating abroad but is willing to buy one can do so in two ways:
- Purchase a term policy in person whenever he’s in India next by taking care of the procedural and underwriting formalities. Once these formalities are completed, the term policy availed by the NRI shall be considered as any other policy by an Indian citizen.
- An NRI can purchase a term policy from India by residing in the foreign country via Mail Order Business facility. The policy purchase is subject to verification by a notary, Indian diplomat, or an official of the concerned Indian embassy abroad.
Features of NRI term insurance policies
- Policy term: The tenure of term insurance policies for NRIs usually ranges between 6 months and 25 years. The minimum entry age is 18 years and maximum age varies between 55 years and 60 years depending upon the health and age of the NRI at the time of purchase.
- Sum Assured: The sum assured has a fixed range between Rs. 2 lakhs and Rs. 1 crore. In the event of the NRIs death, the sum assured, or death benefit is paid to the nominee in his/her NRE (Non-Resident External) account. It depends on the nature of NRI’s job, country of residence and income of the policyholder.
- Premium:There is no fixed premium amount and the amount depends on several factors such as policy term, sum assured, payment frequency, and riders chosen, if any. The premium can be paid online through remittance in foreign currency or the policyholder’ NRO/NRE bank account. The premium payable is the same for resident and non-resident Indians for a given sum assured.
- Documentation: An NRI shall need to submit the following documents to the insurer to initiate the policy enrolment – proposal form, Age and income proof, health report, attested passport copy, application fee equivalent to the first premium payable, etc. Other additional documents such as proof of income in the form of income tax returns, copy of employment contract reflecting the pay compensation, certificate from a chartered accountant, personal financial questionnaire, etc. also have to be submitted to the insurer if an NRI wants to procure a term policy via Mail Order Business by residing in a foreign country.
- Policy Renewal: Few term plans offer a renewal option to the NRI policyholder at the time of its maturity. For this, he shall be required to undergo and pass some medical tests to meet the renewal criteria. Also, NRIs must ensure that they don’t default on the premiums or delay the premiums during the policy term, in order to maintain a good track record.
- Claim Initiation: In case of death of the NRI term insurance policy holder outside India, here are some additional documents that need to be submitted to the insurer to initiate the claim process other than the regular documents such as claim Intimation form (duly filled and signed), original policy document, copy of Address and Identity proof:
- Employer certificate along with leave and contact details
- Embalming certificate by the embalming establishment, if the body has been embalmed to preserve it on death
- Copy of death certificate verified by the Indian Embassy located in the country of death
- Translation of the above documents, if their originals are not in English
Term insurance for NRIs is a huge step by the Indian insurance industry given the large presence of Indian diaspora abroad and their elderly parents and dependents who live here back home. However, it is important to note that not all NRIs can avail the term insurance cover since Indian insurers do not service NRI customers in foreign countries that are troubled, or strife torn such as some Middle eastern or African countries. Their presence is mostly confined to NRIs living in the USA and UK. So, it is important to fill that NRI questionnaire provided by the insurer before moving to another country, to help understand different aspects of relocation. It is important to review the term plans depending on the duration of stay abroad while the family lives behind in India. If the NRI wants to move abroad completely by relinquishing his Indian citizenship, it only makes sense to avail a term insurance plan in his country of residence abroad since it’s easier and saves the hassle of paperwork.
For Indian citizens going abroad on a temporary basis whose families lives in India, there is a choice of term plans such as the Future Generali Online Flexi Term Plan that can provide a basic life cover with a lump sum assured in case of the insured’s death. The basic life cover can also be coupled with options of fixed income protection or increasing income protection in the event of the insured’s death. The policy can be purchased online without the hassle of paperwork, for affordable premiums, and even lower premium rates for women. The premiums paid can be claimed for tax exemption under section 10(D) of the Income Tax Act.