Can an NRI Take Life Insurance in India?

Securing life insurance in India is a practical consideration for Non-Resident Indians (NRIs). It provides a means to protect dependents residing in India or elsewhere, ensuring their financial well-being in unforeseen circumstances. Many Indian insurers offer policies specifically tailored to the unique needs of individuals living abroad, recognizing their ties to India. This allows NRIs to access a range of insurance products that align with their financial planning and long-term goals.

Understanding Eligibility and Policy Options

An individual qualifies as a Non-Resident Indian (NRI) for life insurance if they are a citizen of India residing outside the country for 182 days or more in a financial year. This definition includes Persons of Indian Origin (PIO) and Overseas Citizens of India (OCI), who can purchase life insurance in India. These policies are designed to cater to a global clientele, providing coverage regardless of the policyholder’s current country of residence.

Indian insurers offer life insurance plans for NRIs. Term insurance is a common choice, providing pure protection with a death benefit paid to nominees if the insured passes away during the policy term. Whole life insurance offers lifelong coverage and often includes a savings component, building cash value over time. Unit-Linked Insurance Plans (ULIPs) combine insurance coverage with investment opportunities, allowing policyholders to invest in various funds. Other options include endowment plans, money-back plans, child plans, and retirement plans, each serving different financial objectives.

Gathering Required Documents for Application

Before initiating a life insurance application, NRIs must gather documents to establish their identity, residency status, and financial standing. A valid passport copy is essential, often requiring copies of all pages, especially those detailing entry and exit stamps for India. Proof of overseas address, such as recent utility bills or bank statements, is also necessary.

Applicants need to provide income proof, which can include salary slips, bank statements, or income tax returns. An NRI Questionnaire must also be completed, detailing aspects of their overseas residence and financial affairs. Depending on the policy and sum assured, medical reports may be required, which can sometimes be obtained through tele-medical or video medical examinations conducted in the country of residence. Know Your Customer (KYC) documents, such as identity proof (like a Permanent Account Number or PAN, if available, or Form 60 declaration) and a recent passport-sized photograph, are needed.

The Application and Premium Payment Process

NRIs can proceed with the life insurance application, often through online portals or physical submission. Many Indian insurance companies offer digital platforms and agent services, allowing NRIs to apply and manage policies remotely from their country of residence. While not always mandatory, some NRIs may choose to apply during a visit to India, where they might be treated comparably to resident Indians for underwriting purposes.

A medical examination may be part of the underwriting process, particularly for higher sum assured amounts. These examinations can often be facilitated through tele-medical or video medical consultations, or by undergoing tests in the NRI’s country of residence and submitting the reports to the insurer. The cost of such examinations, if conducted abroad, is typically borne by the applicant. Insurers will then review the application and documents, and the policy is issued.

Premium payments for NRI life insurance policies in India can be made through Non-Resident External (NRE) and Non-Resident Ordinary (NRO) bank accounts. Premiums can also be paid via international wire transfers or through debit and credit cards. While policies are generally issued in Indian Rupees (INR), some insurers may allow premiums to be paid in foreign currency, often through NRE or Foreign Currency Non-Repatriable (FCNR) accounts, with the conversion occurring at prevailing rates.

Managing Your Policy and Claims

After a life insurance policy is issued, NRIs can manage their policy through various servicing requests. These include updating contact information, changing the nominee, or requesting policy statements. Many insurers provide online portals and dedicated NRI helplines to facilitate these changes, ensuring that policyholders can manage their accounts from abroad. Keeping contact details current is important for receiving communications and ensuring smooth operations.

The nominee initiates the death claim process. This typically involves submitting the death certificate, the original policy document, and a claim form, along with identity and address proofs of the nominee. Insurers often have streamlined claim settlement processes, with some offering express settlement within a few hours upon complete documentation. For maturity or survival benefit claims, the policyholder submits the required forms and documents to receive the payout.

If the premiums were paid in foreign currency, the maturity or death benefits can be repatriated in foreign currency in proportion to the premiums paid in that currency. For policies where premiums were paid in INR, the proceeds are disbursed in INR to an NRO account. While the Foreign Exchange Management Act (FEMA) governs these transactions, insurers guide the nominee or policyholder through the specific requirements for fund transfers to overseas accounts.

Tax Implications for NRIs

Life insurance policies purchased by NRIs in India offer tax benefits under the Indian Income Tax Act, 1961. Premiums paid for these policies are eligible for deductions under Section 80C, up to ₹1.5 lakh in a financial year. This deduction applies to premiums paid for the policyholder, their spouse, or children, contributing to a reduction in taxable income.

Maturity proceeds or death benefits received from a life insurance policy are exempt from tax under Section 10(10D) of the Income Tax Act. This exemption is subject to certain conditions, primarily related to the premium paid relative to the sum assured. For policies issued after April 1, 2012, the annual premium should not exceed 10% of the sum assured for the maturity benefit to be tax-exempt. For Unit-Linked Insurance Plans (ULIPs) issued after February 1, 2021, the exemption applies if the aggregate annual premium does not exceed ₹2.5 lakh. If the payout does not meet these conditions, it may become taxable, and Tax Deducted at Source (TDS) might apply.