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5 Things to Consider While Purchasing Life Insurance for Foreign Nationals

24-June-2021 |

Purchasing a life insurance policy is a prudent life decision for any individual. Insurance providers in India offer various traditional and comprehensive policies that ensure financial security for your family in your absence. In addition to this, a term plan is cost-effective and provides tax* benefits.

It is worth noting that the benefits of term insurance sold in India are available not only to Indian nationals but to foreign nationals as well. However, a few things require special administration in the case of life insurance for foreign nationals.

 

What Should Be Considered While Buying Life Insurance for Foreign Nationals


Here are a few factors that play a significant part in life insurance policies for foreign nationals.

 

1. Check Whether You Qualify as an NRI or PIO

Non-resident Indians (NRIs) and Persons of Indian Origin (PIO) can apply for life insurance policies in India, including term insurance. A Non-resident Indian is a citizen of India or a person of Indian origin who does not reside in the country.

According to Section 6 of the Income Tax Act, 1961, an individual is termed as a resident of India if they satisfy either of the following conditions:

  • If the individual is present in India for 182 or more days in the preceding year;

  • If the individual is present in India for 60 days or higher in the preceding year and 365 days or higher in the four years immediately preceding the previous year. There are a few amendments to this eligibility criterion based on the employment and salary of the individual.

A Person of Indian Origin (PIO) is a citizen of a country other than Bangladesh or Pakistan who satisfies one of the following conditions:

  • They have had an Indian passport at any time in the past;

  • They or at least one of their parents or grandparents was a citizen of India based on the Constitution of India or the Citizenship Act, 1955;

  • They are a spouse of an Indian citizen or a person.

 


2. Find the Right Insurer

 

If you are eligible to purchase life insurance in India, the next important step is to find the right insurance provider. If you plan to purchase a term plan, you can determine the leading insurance companies in India by comparing the product features, claim settlement ratio, customer reviews, etc.

Life insurance policies provide a range of distinct features that you can peruse and understand online. For instance, with a term plan, you can choose the mode of payout of the death benefit as a lump sum, as an income for a defined set of months, or a combination of both. You can also increase the sum assured at different stages of your life based on your family commitments and earning capability.

There are no specific life insurance policies exclusively for foreign nationals in India. However, you can enquire about any special assistance or preferences in your term plan based on your residency situation.

3. Check the Modes of Premium Payment


Insurers in India issue life insurance policies to foreign nationals in either Indian National Rupee or the applicable foreign currency. For example, suppose your term life insurance for foreign nationals in India is issued in a foreign currency. In that case, you can pay the premium in foreign currency or out of your or a family member's Non-Resident External Account (NRE) or Foreign Currency Non-Resident Account (FCNR).


If, however, the policy is denominated in Indian rupees, you can pay the premium from your Non-Resident Ordinary Account (NRO). It is important to check the permissible mode of payment before applying for a term life insurance policy for foreign nationals in India. If you reside in a country where the risk to life is high, the premium of your term plan may be higher than one issued to an NRI or PIO living in a low-risk nation.

 

4. Undergo a Medical Examination

While purchasing a life insurance plan, it is important to get a medical examination done to decide on the premium and the sum assured. Insurers calculate the premium based on your health condition to understand the risks associated with your health. You can either get the necessary medical examination done in your country and send the reports to the insurer or visit India and get it done here.

With the advancement of technology, you can buy online term insurance and calculate the policy premium based on the sum assured and the policy term using an online life insurance calculator. You can also upload the necessary documents and medical reports online for an easy and swift application process.

5. Be aware of the Tax* Aspect


Another very important aspect associated with life insurance policies is their tax* benefits. In India, you can avail of the tax* deduction on premium payments under a life insurance policy under Section 80C of the Income Tax Act, 1961. Furthermore, the proceeds from your life insurance policy are exempt from tax* under Section 10(10D) of this Act.

However, you must consult the necessary officials regarding the taxation* policy in your country of residence with regards to the accumulation and maturity phases based on a term plan.

 

Conclusion

In India, buying a life insurance policy is a priority for most individuals. Foreign nationals can also avail of the benefits of term insurance if they are Non-resident Indians or Persons of Indian Origin. However, there are a few conditions that determine whether one qualifies as an NRI or PIO.

If you are a foreign national and planning to purchase a life insurance policy in India, you must be mindful of the important considerations discussed above before selecting a term plan for yourself or your family.


L&C/Advt/2021/Dec/2211

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A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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