Are insurance proceeds taxable for NRIs?

Under the old tax regime, insurance payouts are typically tax-exempt under Section 10(10D).

Can NRIs buy policies under MWPA?

Yes, Non-Resident Indians (NRIs) can buy life insurance policies under the Married Women's Property Act (MWPA) of 1874. This can help protect their family's finances in India.

Is life insurance purchased in India valid worldwide?

you die while residing abroad, your beneficiaries can still claim the death benefit, provided you informed your insurance company about your relocation and the policy terms don't specify any restrictions on location at the time of death; however, it's crucial to carefully read your policy documents to understand any specific exclusions or limitations regarding coverage outside India.

Is there a free-look period for policies bought by NRIs?

Yes, NRIs (Non-Resident Indians) are entitled to a "free-look period" when purchasing insurance policies in India, allowing them to review the policy terms and cancel it within a specified timeframe (usually 15 days for physical policies and 30 days for electronic policies) if they are not satisfied with the terms; this applies to all types of insurance policies bought by NRIs.

Is there a difference in claim settlement if the nominee resides outside India?

Yes, if the nominee of a life insurance policy resides outside India (i.e., an NRI), the claim settlement process might involve additional documentation and may require the payout to be credited to their NRE (Non-Resident External) account in foreign currency, depending on the policy terms and how the premiums were paid; essentially, the claim settlement process might be slightly more complex compared to a nominee residing within India.

Can NRIs buy life insurance without a PAN card?

No, NRIs generally need a PAN card to buy life insurance in India. However, they can submit a declaration in lieu of a PAN card.

How are claims settled for NRIs residing abroad?

For NRIs residing abroad, insurance claims are typically settled in accordance with the Foreign Exchange Management Act (FEMA) regulations, meaning the claim amount can be paid in Indian Rupees if the premium was paid in Rupees, or in foreign currency if the premium was paid in that specific foreign currency; the payment can be made directly to the NRI's foreign bank account or a Resident Foreign Currency (RFC) account maintained in India.

Can NRIs take life insurance policies for their children in India?

Yes, Non-Resident Indians (NRIs) can buy life insurance policies for their children in India. This includes term insurance, child insurance, and money back insurance.

Navigating regulations: How can NRIs buy life insurance in India?

Introduction

Life insurance is a necessary component of your financial safety net to protect loved ones against unforeseen events. NRIs specifically need it because of their mobility to different countries, and changing their jobs. Life insurance protects NRIs from the uncertainties that come with living life abroad.

Why should NRIs buy life insurance in India?

NRIs should purchase life insurance in India primarily because it provides financial security for their families in case of an unexpected death or disability. The premium in India is more affordable compared to their country of residence. Life insurance in India comes with additional benefits like tax deductions under Section 80C of the Indian Income Tax Act, allowing them to diversify their investments and protect their loved ones' financial stability even while living abroad.

Types of life insurance plans available for NRIs

NRIs have different options to choose from while buying a life insurance plan based on their financial needs. NRIs can choose from term insurance, whole life insurance, Unit Linked Insurance Plans (ULIPs), endowment plans, money back insurance plans, child insurance, and retirement insurance plans.

Term insurance guarantees death benefit to plan’s nominee in case of death of the NRI. Whole life insurance provides coverage for NRIs throughout their life. ULIPs combine investment along with insurance. Along with providing insurance, ULIPs invest in equity, debt and hybrid funds based on the requirement of NRIs. Endowment plans provide fixed returns at the end of policy term, and provide life cover to protect the NRIs. The money back guarantee plan provides return at regular intervals. The retirement plan lets you save for retirement along with life cover.

Based on requirements, you can choose a plan that suits your needs.

Eligibility and documents needed for buying Indian life insurance:
Indian life insurance is only open to Indian citizens residing outside India temporarily. While buying the insurance, you need to fulfill the documentation needs like passport, proof of residence, and income tax or other documents that shows your income.

In addition to the documentation, you may be required to take a medical examination. This can be done in your current country of residence.

Steps to buy life insurance in India

The process of buying life insurance in India is similar to that of the Indian citizens.

In the first step, NRIs need to choose the type of insurance, and the company insuring it. They can purchase the plan on their visit to India, purchase it from their country of residence through mail order or purchase it online.

In the second step, they need to decide on the policy term of the insurance. The premium paid is based on the policy's terms, age, frequency, and health conditions. Plan’s duration can range from five years to 30 years, and the sum assured can range from INR 2 lakh to INR 1 crore.

In the third step, after finalising the plan, they can fulfill the documentation needs like valid passport, age proof, residence proof, income proof etc. along with the first premium payment.

For NRIs who provide a valid Form 10F and TRC will not have Tax at Source (TDS) deducted.

Factors to Consider Before Buying Life Insurance in India

When buying life insurance in India as an NRI, there are some factors you need to consider for choosing the best insurance that suits your needs. This includes your age and life stage, dependents and financial obligations, health and medical history, duration of stay abroad, premium payment mode, tax benefits, claim settlement ratio, policy exclusions, and the chosen insurance company's reputation for efficient claims processing.

From the insurance policy aspects, there are other aspects to evaluate while buying an insurance. Check the coverage amount that adequately protects your family’s needs while ensuring the premium is within your budget. Term insurance provides affordable high coverage, while ULIPs covers your investment goals. Understand what deductions you can claim under the Indian income tax act. Choose a convenient time such as monthly, quarterly or annually and method of payment for your premiums.

While choosing an insurance company, compare the claim settlement ratio across the companies, exclusions not covered by the insurance, and the company's track record of customer service.

The process might look overwhelming for you, but careful consideration secures your family’s future for a longer time. You can also seek financial advice from an advisor to find the best insurance that suits your needs.

Tax benefits for NRIs in life insurance

NRIs can get several tax benefits on buying life insurance products out of India. Your gains from insurance policy (ULIPs and endowment plans) based out of GIFT City the ULIPs and endowment plans are tax free when premiums amount is not more than 10% of the amount insured.

Apart from this, if you are filing tax in India under the old tax regime, you can claim deductions up to Rs. 150000 from your premiums. There’s an additional 18% GST waiver on the premiums paid through your NRE account.

Top Life Insurance Plans for NRIs

Here are some of the top-term life insurance plans in India, for NRIs:

Policy Name	Entry Age	Policy Term	Premium Payment Method	Claim Settlement Ratio	USP
ICICI Pru iProtect Smart Plan	18 to 65 years	Allows purchase of protection up to 99 years of age.	NRE/NRO account, credit/debit card payment, foreign remittance	95.28%	Longer and more comprehensive coverage Four flexible cover payout options Rider options include accidental death cover, and critical illness cover
HDFC Life Click 2 Protect Super Plan	18 to 84 years	Allows purchase of protection up to 85 years of age.	NRE/NRO account, credit/debit card payment, foreign remittance	99.39%	Comprehensive basic protection, plus additional riders to choose from as per the need Special premium rates for women Rider options include critical illness cover, and accidental disability benefit
Max Life Smart Secure Plus	18 to 65 years	Allows purchase of protection up to 85 years of age.	NRE/NRO account, credit/debit card payment, foreign remittance	99.51%	Comprehensive coverage with joint life cover option Accelerated terminal illness benefit Premium break option and return of premium variant Rider options include accidental death cover, and critical illness cover
Bajaj Allianz Life eTouch	18 to 65 years	Allows purchase of protection up to 99 years of age.	NRE/NRO account, credit/debit card payment, foreign remittance	99.04%	Comprehensive coverage with three main variants offered Rider options include accidental death cover, and waiver of premium
SBI Life eShield Next	18 to 65 years	Allows purchase of protection up to 99 years of age.	NRE/NRO account, credit/debit card payment, foreign remittance	97.05%	Comprehensive and customisable coverage Terminal illness benefit Rider options include accidental death cover, and accidental disability benefit

Common mistakes to avoid when buying life insurance in India

Going for the wrong policy could put your entire family's finances in jeopardy. Discuss multiple policy options with your financial advisor so you are able to arrive at the right one with coverage and rider benefits suitable for your insurance needs.

It can feel like a long and arduous process to read the policy's fine print, but it is essential to read the terms and conditions in order to avoid any misconceptions and ensure you can smoothly avail the policy's benefits at the time of need. You will know exactly when and how much money you or your nominee can claim and how and thus be prepared for any exigency.

If you provide inaccurate information at the time of purchase of the policy, it could lead to future claim rejections. Make sure to read the questions thoroughly and answer them correctly and with complete information.

Understanding the lifetime cost of the insurance plan against the benefits provided is important for responsible and accurate financial planning. Be aware of the costs and taxes involved, along with the features and benefits offered in order to make a rational choice. Also, be aware of any miscellaneous costs, such as a pre-policy medical checkup.

It is important to know which additional benefits and riders you can opt for to maximise your overall coverage so that you can customise your plan to suit your needs.

Conclusion

Life insurance policies offer a wide base to fulfill the different needs of NRIs. The proper application of continued payments in perpetuity gives an assurance for continued coverage, thereby avoiding penalties and rendering one financially free.