Life insurance is a necessary component of your financial safety net to protect loved ones against unforeseen events. As per Indian regulations, NRIs are also allowed to purchase life insurance policies in India as long as they can fulfill requisite KYC requirements. To ensure ease of transaction for this important demographic, insurance companies accept premium payments through various modes, such as payments from NRE/NRO bank accounts, foreign currency remittances, international credit and debit cards, and payments from family members residing in India. Here we’ll walk you through how you can make insurance payments from abroad, some of the top term life insurance policies to choose from, and common mistakes to avoid when purchasing a life insurance policy.
How can NRIs make insurance payments from abroad?
NRIs can digitally purchase a life insurance policy whenever they visit India. When applying from abroad, the process may require you to submit a physical application through ‘mail order’, and may require notary/witness signatures from your employer or the local Indian consulate. Make sure to check the process with the specific insurance provider you choose. Premium payments from abroad are generally accepted through the following methods:
- NRE (Non-Resident External) account: You can make payments using repatriable funds from your NRE account. Do note that in this case, the insurance payout (on death or policy maturity, whichever is applicable) would be made to a repatriable/foreign account as well.
- NRO (Non-Resident Ordinary) account: Indian funds in your NRO account can also be used for premium payment. The payout, in this case, would also be made to a domestic account only.
- Foreign currency remittances: NRIs can remit the premium amount directly from their foreign bank accounts to the insurance company in India through authorized banking channels.
- Third-party payments: Some insurance companies allow close family members residing in India to pay premiums on behalf of the NRI policyholder.
- Online payment: NRIs can use their international credit/debit cards to pay premiums through insurance companies' online portals.
Top life insurance plans for NRIs
Some key factors to consider when choosing the right life insurance plan include the policy type, amount of coverage, insurer’s reputation, after-sales support, and convenience of premium payment options. 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 | Features |
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% |
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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% |
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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% |
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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% |
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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% |
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Common mistakes to avoid when buying life insurance in India
1. Choosing the wrong policy:
Opting for the incorrect policy could be detrimental to your family’s financial future. Discuss the various policy options with your financial advisor to ensure that you select the right type of policy, coverage, and rider benefits suitable for your insurance needs.
2. Failing to read the fine print:
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 to avoid any misconceptions and ensure you can smoothly avail the policy's benefits at the time of need. You would know exactly when and how much money you or your nominee can claim, and how, and thus be prepared for any exigency.
3. Incomplete or inaccurate information:
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.
4. Failing to properly assess the cost:
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, to make a rational choice. Also, be aware of any miscellaneous costs, such as a pre-policy medical checkup.
5. Not knowing tax implications:
If you have income in India and file your returns under the old tax regime, you can avail yourself of income tax benefits for your life insurance policy. The premium up to Rs. 1.5 lakhs per annum is tax-free under Section 80C as per the old tax regime, and the payout is also typically exempt as per Section 10(10D).
6. Overlooking additional benefits:
Knowing the additional benefits and riders available to enhance the coverage and customize the plan can help you extract maximum value from the policy.
Importance of timely insurance premium payments for NRIs
- Timely payments guarantee continuous coverage without any gaps, providing financial protection for your beneficiaries against uncertainties.
- Timely payment of premiums can also help prevent unforeseen hiccups in the claim settlement process.
- Missing payments can increase the overall cost of policy maintenance, with late fees or other penalties levied on late payments. Reinstating the lapsed policy often involves additional charges and possibly a new medical examination.
- Regular and timely insurance payments positively impact your credit score, reflecting good financial discipline.
Conclusion
The right life insurance policy can provide comprehensive coverage and flexible options to cater to the unique needs of NRIs. Avoiding errors in your application and making timely insurance payments ensures you maintain continuous coverage, avoid penalties, and enjoy financial peace of mind.
