We are familiar with non-resident Indians (NRIs) participating in the equity, mutual funds and real estate market in India. In many ways, NRIs are given the same privileges as resident Indians including all tax exemptions and rebates as the Income Tax Act stipulates. Only the documentation is more stringent and comprehensive! Let us dwell on two critical aspects of insurance i.e. life insurance and health insurance for NRIs.
Buying life insurance: Available to NRIs and PIOs?
The definition of an NRI has been broadened to include a person of Indian origin (PIO) also. NRIs and PIOs are allowed to buy life insurance in India, subject to certain conditions. A PIO is defined as a person who fulfills any of the below conditions.
He/she has held an Indian passport any time in the past
The person or either of the parents or grandparents were a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955.
The individual is a spouse of an Indian citizen or a person referred to in clauses 1 or 2.
A PIO falling under one of the above-mentioned categories and an NRI with a valid Indian passport are eligible to buy life insurance in India.
Steps for an NRI / PIO to buy life insurance in India
Any NRI with an India passport or a PIO are eligible to buy life insurance in India. Here are the basic steps that an NRI needs to take before buying life insurance in India.
Ø The first step is to find a reliable life insurer in India. There are over 23 life insurance companies offering a wide range of products to choose from. You must focus on factors such as the pedigree of the management, company’s claim settlement ratio, track record, and group’s experience, IRDA issues, etc. There is no special offering for NRIs, but some insurers have improvised policies to suit the unique needs of NRIs.
Ø To make the documentation and processing easier, some leading life insurers have set up dedicated NRI cells within their insurance business for more personalized advice and support. Such dedicated NRI cells are offered by SBI Life, LIC, Max Life, ICICI Prudential Life and Kotak Life.
Ø Verify the tax implications at all three stages of policy life cycle i.e. investment, accumulation and maturity. While current tax laws in India exempt all three stages from tax, make sure it is the same in your country. Insurance advisors can explain about tax incidence in your country. Buying life cover in India is affordable and comprehensive, but don’t get caught on the wrong foot with respect to taxation.
Ø Since you are located abroad, be clear on the premium payment methodology. You can opt for a foreign currency denominated policy in which you pay the premiums in foreign currency or through your NRE/FCNR account. Alternatively, you can opt for rupee denominated policies in which you pay premiums in rupees using NRO accounts.
Ø Finally, be clear about the medical examination procedure. It is always advisable to go through medicals, irrespective of what the agent promises you. One way is to come to India and your insurer will bear the costs for the requisite medical tests. The other option is to do it overseas and send the report to the insurance company in India. In the latter case, you have to bear the cost, unless you are buying a policy targeted specifically for non-residents with a tie-up with an overseas medical facility for the purpose.
Once these procedures are completed, you are good to use your life policy and also get all the tax benefits like a resident Indian. Section 80C benefits can be claimed on premiums.
How can NRIs buy health insurance in India?
Can an NRI buy health insurance (medical cover) in India? What are the conditions and what are the exceptions? Here are few things an NRI needs to do before selecting and signing up for health insurance in India.
Read the fine print for geographical coverage. Most health policies have geographical restrictions, and the policy will only cover expenses for treatment in India. However, some insurers have started covering treatments outside India for select illnesses.
Check for underwriting restrictions outside India. People resident outside India are perceived to be riskier due to the fact that it is difficult to corroborate facts in case of a claim and ascertain the genuineness of the same. Check for the decline ratio and whether there is any cap on the sum.
When an NRI buys health cover in India Foreign Exchange Management Act (FEMA) regulations are applicable. On purchase of policies from insurers in India, claim payouts can be repatriated out of India to the extent of premium paid in foreign currency.
Tax benefits under Section 80D are the same for residents and NRIs. Apart from the Rs25,000 deduction for a policy for the self, spouse and dependent children, you can also get a separate limit of Rs25,000 (Rs50,000 for senior citizen parents) towards your parents’ health insurance.
If you plan to return to India after 3-4 years, you do not have to purchase health cover in India right now. You can just hold on to your foreign health cover. However, if your time to return to India is less than 3 years then you can consider buying an insurance cover in India during your visit to India on a vacation. The benefit is that once you return to India, you’ll not have to rush for purchasing a health cover.