Living abroad as a Non-Resident Indian gives one the best of two worlds. But with life abroad comes the responsibility of not just your career but also your roots. Do you have parents back home? Do you have properties under your name? With growing age, your responsibilities increase manifold. Since your family depends upon you, it is your duty to ensure that they are financially safe and secure.
The best and most affordable way of doing so is by purchasing a pure term insurance plan from an Indian insurance company. However, there are a few dos and don’ts to buying life insurance for NRI.
1. Why You Should Buy Term Insurance from India
While there are insurance options available to buy life cover from your country of residency, it is always better to go with an Indian insurance plan for several reasons:
- Lower Premium Rates: Term insurance premiums are generally much lower in India as compared to Western countries or the Middle East
- Legal and Tax Compliance: Policies issued from India would be much easier to understand and comply with, considering that they operate under the IRDAI guidelines
- Claim Settlement in Indian Rupees: In case of a claim, you wouldn’t have to convert the claim amount from INR to your local currency, as the insurance money would be directly transferred to your nominated bank account
- Policy Covers Death Worldwide: Most insurance policies issued from India provide coverage for death occurring anywhere in the world, except for the few countries specified by the insurance company
2. What is an NRI and How do Insurance Companies Categorise You?
Whenever you speak to an insurance agent or apply online, they would want to know your category first. You would generally fall under one of the following categories:
- NRI: An Indian citizen who has a valid Indian passport and currently resides in a foreign country for employment, business, or any other purpose
- PIO/OCI: Individuals holding a foreign passport but who are of Indian origin or whose parents or grandparents were Indian citizens
- Foreign Nationals: An individual who does not hold an Indian passport and resides in a foreign country.
Depending on your category, your eligibility, premium rates, sum assured, and required documents will differ. Additionally, countries fall under various risk categories depending on their political, health, and general stability. Hence, your premium rates may differ depending on the country you currently reside in.
3. Things to Remember Before Buying Life Insurance Policy
Tele-medical examination vs Physical Examination
It is mandatory that the life insured takes a health examination before finalising a life insurance policy. Depending on your age, sum assured, and country of residence, the following options would be available:
- Tele-medical Examination: Some insurers offer tele-medical examinations for people with a clean medical history or who reside in low-risk countries (more on this below)
- Physical Examination: Some insurers require a physical examination for the life insured to be carried out at an authorised diagnostic center in your country of residence (on your personal expense) or when you visit India
Currency and Bank Transfers
There are multiple ways of making premium payments if you are an NRI. Some of them are:
- NRE Account: Any premium payments made to this account would be in foreign currency, as this account is funded by your earnings in the foreign country. In case of a claim or surrender, this amount would be freely repatriable.
- NRO Account: Any premium payments made to this account would be in INR as this account is funded by income earned in India (dividends, rental income, etc.). In case of a claim or surrender, this amount would be subject to NRI repatriation rules.
- Foreign Currency Account: Depending on the insurance company, you may also pay directly in your local currency either by debit or a wire transfer
Countries Covered and Excluded
Most insurance companies maintain a list of countries that are excluded and included for coverage. Hence, if you are residing in a politically or physically unstable country, your coverage could be limited, denied, or attract higher premiums. It is always best to provide the exact country of your residence and the nature of your work as mentioned in your application form.
4. Tax Benefits on Your Insurance Premium under the New Income Tax Act, 2025
NRIs who are eligible to claim tax benefits in India should understand the applicable rules before claiming deductions on life insurance premiums or policy benefits.
- Tax Savings on Eligible Insurance Premiums: Under Section 123 read with Schedule XV of the Income-tax Act, 2025, eligible life insurance premiums may qualify for a deduction, subject to the prescribed conditions and the overall ₹1.5 lakh limit for specified payments. This deduction is not available under the concessional tax regime covered by Section 202.
- Tax Benefits on Health Insurance Premiums: Section 126 covers eligible health insurance premiums and specified medical expenses. However, a health rider attached to a term insurance policy does not automatically qualify for a separate deduction. Eligibility depends on the applicable provisions and conditions.
- Tax Treatment of Death Benefits and Maturity Proceeds: The tax treatment of life insurance benefits depends on the applicable provisions of the Income-tax Act, 2025, including Schedule II, and the relevant conditions and exclusions. Policyholders should verify the applicable rules before assuming that all policy proceeds are tax-exempt.
- Tax Considerations in Your Country of Residence: NRIs should also consider the tax laws of their country of residence, as the treatment of premiums and policy benefits may differ from Indian tax rules. Consult a qualified tax professional to understand your tax obligations in both jurisdictions.
5. Important Buying Considerations for NRIs
Buy insurance online from your foreign country
While it may seem daunting, buying insurance online from your foreign country is much simpler than one thinks. Here is a step-by-step procedure to follow:
- Calculate your sum assured: Make sure that your sum assured will take care of all your liabilities such as your personal loan, family expenses, and your child’s education (inflation-proof).
- Choose your riders: Choose from a wide range of riders (accidental death, critical illness, etc.) to customise your plan as per your needs.
- Fill out your proposal form completely: Fill out your proposal form completely and honestly. Make sure not to conceal or misrepresent any part of your health and lifestyle. This could affect your claim settlement in the future.
- Submit necessary documents:
- Your passport copy (showing your entry and exit visas)
- Proof of NRI status (work visa or work permit or resident card)
- Proof of your income in the foreign country (salary slips or work contract or tax returns or bank statements)
- ID proof, address proof, and other documents (residing both in your foreign country and in India)
- Underwriting and Approval: The insurance company undertakes a few formalities before issuing your policy.
Conclusion
Ensuring that your family is financially safe and secure is the best gift you can give them. With the right amount of life coverage, you can rest assured that no matter where your career path takes you, your family is taken care of. And with term insurance plans, you get this at an affordable price. So, what are you waiting for? Buy a life insurance plan today! Disclaimer: Insurance is a subject matter of solicitation. The eligibility to buy a policy, underwriting, premium amount, riders, and claim settlement are all solely governed by the terms and conditions of the respective insurance company. The tax rules and rates are subject to change according to government guidelines. Therefore, it is always best to consult a tax consultant or an insurance agent before buying a policy.