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17 Mar, 2022 | Opinion

Should NRIs Purchase Health And Term Insurance In India?

Aakansha Jain
By Aakansha Jain
Research & Content Ninja at Beshak
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Many of us go abroad in pursuit of a great career and to live our dreams. And while the world gives us a great opportunity to work, create wealth and lead a comfortable life, we might realize that our heart is still back here - in India. A lot of the people we know have wanted to study and work abroad but return to their homeland, the city where they grew up post-retirement. It gives them comfort to return to a place they love, and can truly call home. 

If you can relate to this - this article will help you understand how you can make the most of insurance products available in India to prepare for your return, while you’re still an NRI - a Non-resident Indian. 

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First - let’s talk about health insurance. 

Health Insurance

As India becomes one of the best countries for access to quality healthcare, medical expenses, too, are skyrocketing. If you’re living in India, it is a must to purchase a good health insurance plan. But did you know that you can also buy a health insurance plan in India for your entire family today and prepare for the long-term, while still being an NRI?

Yes, you can.

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Why should you buy health insurance while you’re still abroad?

Here are 4 reasons why you should purchase a health insurance cover in India while you're living abroad:

1️⃣ Get a cover while you’re still young & healthy

In case you’re planning to come back to India after retirement, you wouldn’t only be older but there are also chances you would have developed a serious illness. It might become difficult to get a policy due to both age and health-related constraints. So, you can pre-book a good cover at a reasonable cost while you’re still earning abroad and while both you and your family are healthy and fit - which might not be possible later. 

2️⃣ Waiting periods will be completed while you’re still abroad

In India, insurers apply waiting periods on certain diseases - the period during which you won’t be able to claim for those diseases. Only after the waiting period is completed, you’ll be allowed to claim for those diseases. So, if you buy a policy while you’re still abroad, all your waiting periods will be completed. 

3️⃣ Get a cover at a cheaper price 

Compared to a few countries such as the UAE or the USA, the cost of health insurance in India is relatively cheaper. One major reason behind this is the cost of medical treatments in such countries is way too high and as a result, the health insurance premiums are high too. This is mostly the case in developed countries. So, ensure you compare the prices and benefits offered by the plans available in the country you’re currently residing in with the plans available in India before you make a decision.

4️⃣ Tax deductions

You can also get tax benefits on the premiums you pay for a health insurance policy purchased in India under section 80D of the Income Tax Act, 1961 up to the specific limits. You should note that these benefits can only be availed if you’re filing your tax returns in India.

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Important things to note:

  1. Health insurance in India comes with geographical limitations - meaning, it will only cover expenses of medical treatments undergone in India. So, if you plan to live in a foreign country for a very long time or do not have plans of coming back to India at all, there would be no point in buying health insurance in India. 
  2. If you’re staying abroad for education or work-related purposes, and are offered a student or employer health cover in your respective college or office, it is highly recommended that you continue with these plans in addition to buying a health insurance policy in India. This way, you can have health insurance coverage in the country you’re residing in as well, and use it in case you need to undergo any hospitalization there.

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Now let's talk about term insurance for NRIs in India.

Term Insurance

The second type of insurance you must buy as an NRI is a term insurance policy. Let’s learn how it works, why you should buy it, and what you should keep in mind before purchasing it.

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How does term life insurance work in India?

Term Insurance is the simplest type of life insurance product available in India. It is one of the cheapest ways through which you can ensure that your family will have proper financial security when you pass away. 

Term insurance provides a lot of customization options and allows you to design a policy to perfectly fit your and your family’s needs. Have an unstable income? You can choose the limited pay option and finish paying off your premiums quickly. Want to buy a cover that will automatically increase the coverage with time? You can choose the increasing cover feature. Think your family won’t be able to handle the claim money? You can customize how your family receives the claim payout as well. 

You should consider purchasing a term insurance policy if - 

  • You’re the only earning member in your family and have financial dependents who depend on your earnings for their living. 
  • You’ve invested in properties in India and have taken loans for the same. 

The term insurance claim amount will help your family deal with both short-term and long-term dreams and goals. And in case you have unfinished loans/ liabilities, they can use the claim money to settle those as well.

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What are the documents required for NRIs to purchase term insurance in India?

If you're buying a term insurance plan in India as an NRI, you will have to submit the following documents to the insurance company - 

  • Duly filled application form
  • Attested copy of passport
  • Medical tests and reports
  • Age proof certificate
  • Income proof papers

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4 things to know while buying term insurance in India as an NRI

Here are 4 important things you should note if you're planning to buy term insurance in India as an NRI:

1️⃣ Death is covered globally 

Except for suicide in the first year of buying the policy, term insurance purchased in India covers every type of death anywhere across the world. So, if you buy a policy in India and die in Singapore or in Canada, or in any other country, your family will still receive the claim - no matter where your death happens.

2️⃣ Term insurance costs are low in India

One of the main benefits of purchasing term insurance in India is the low premiums. Compared to other countries, the premiums of term insurance in India are very cheap. The yearly premium of an INR 1 Crore term insurance policy is as low as INR 10,000. Meaning, for every rupee you invest, your family will get INR 1000 back, if you die during the policy duration. 

3️⃣ Your nominee should evaluate taxation 

Most insurance companies will deposit the claim in an NRE (Non-resident External) account. If that happens, the country you’re currently living in might impose some taxes on it. So, make sure you inform your nominee to check whether the proceeds are taxable or not. 

Also, if you’re filing taxes in India, you can get tax benefits from both the term insurance premiums and claim amount under the Income Tax Act of India, 1961. The term insurance premiums you pay every year will be tax-deductible under section 80C and you can claim a maximum deduction of up to INR 1,50,000. Further, the term insurance claim amount that your family will receive if you pass away during the policy term will also be completely tax-free as per section 10 (10D). 

4️⃣ Protection under Section 45

Section 45 of the Indian Insurance Act, 1938  says that an insurance company cannot investigate or reject a death claim on any grounds whatsoever if a term insurance policy has been in force for three years continuously. We are not sure this type of law is available in any other country in the world, but this makes term insurance in India a very good option to invest into, as it practically guarantees a payout for your family - if your death happens after three years of the policy being in force (and of course, within the policy term period).

Got a question about NRI Tem Insurance or Health Insurance? 

You can post it on the Beshak Insurance Forum - and get answers from vetted experts, for free!

Key takeaways
  1. As an NRI, it is important that you buy a term and health insurance policy in India, if you are planning to come back to India.
  2. You should buy health insurance in India while being abroad so that your waiting periods are completed, and you can pre-book a good cover while you and your family are healthy and fit - which might not be available later.
  3. You can also get tax deductions on the health insurance premiums you pay in India u/s 80D of the Income Tax Act, 1961 - if you’re filing your returns in India.
  4. Term insurance premiums are very cheap in India.
  5. Except for suicide in the first year of buying the policy, term insurance covers every type of death, anywhere across the world.
  6. You should ask your nominee to evaluate taxation when they will receive the claim - most insurers will pay the claim in the NRE account, but whether the proceeds are taxable or not, needs to be evaluated.
  7. You and your family can get tax benefits on the term insurance premiums and claim amount under section 80C and section 10(10D) of the Income Tax Act, 1961 respectively. 
  8. If you buy term insurance in India, Section 45 of the Insurance Act, 1938  states that an insurer cannot reject a term insurance claim after a policy completes three years. This benefit might not be available in other countries.
Aakansha Jain
Written by,
Aakansha Jain, Research & Content Ninja at Beshak

Aakansha is a Content Ideator and Writer at Beshak. With her easy-to-understand content, she makes insurance simple for everyone. She comes with a strong background in finance and commerce and wants to help families make positive insurance decisions that are good for a lifetime.

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