Term insurance plans for NRIs: Ensure policy offers global coverage

Verify insurer's claim settlement ratio, review sum insured limits, and check if medical examination can be done over video

Term insurance purchases by non-resident Indians (NRIs) have doubled on Policybazaar’s platform over the past two years. Many are turning to plans from India to safeguard their families, with those from the United Arab Emirates (UAE) and other Gulf Cooperation Council (GCC) nations leading the trend.

 

Attractive premiums 

Lower premium rates are a major draw. “Term insurance plans purchased from India are 30–50 per cent more affordable compared to similar covers abroad,” says Varun Agarwal, head of term insurance, Policybazaar.com. This enables NRIs to secure higher cover for the same cost.

 

Claim settlement is also easier for nominees. “Since beneficiaries or nominees are usually in India, the claim settlement process becomes more streamlined and efficient,” says Nitin Mehta, chief distribution officer – partnership distribution and head marketing, Bharti AXA Life Insurance.

 

Tax benefits are another attraction. “Those who generate taxable income in India can use the premium payment for tax benefits under Section 80C,” says Abhishek Kumar, Sebi-registered investment adviser and founder, SahajMoney.com. NRIs who pay via non-resident external (NRE) accounts are also exempt from 18 per cent GST on the premium.

 

Policies with coverage up to ₹5 crore can now be purchased through tele-medical check-ups, eliminating the need for physical visits. Other attractive features of term plans available in India include high sum assured options with customisable add-ons, return of premium at no extra cost, early payouts for terminal illness, premium waivers for permanent disability, and immediate payout of up to ₹2 lakh on claim intimation for obituary expenses.

 

Watch out for territorial limits 

Challenges may arise during underwriting and medical evaluation, as some insurers may require physical examinations in India.

 

Buyers must also watch out for geographical limits. “Review any territorial clauses in the policy, as these may limit coverage or impact claim settlement in certain foreign locations,” says Mehta.

 

Currency fluctuations can also affect premiums year to year. Claims may also be difficult if the family remains abroad after the insured’s death.

 

Ideal cover and tenure 

The sum insured should be adequate to meet the family’s expenses (without curtailing the lifestyle it is accustomed to), liabilities such as home loans, and children’s education. “Based on the human life value of a person, a term cover which is 10 to 20 times their annual income is a good starting point,” says Kumar.

 

Tenure should cover the breadwinner’s earning years. “The tenure should last until the retirement age or until the dependants become financially independent,” says Mehta.

 

Points to remember 

NRIs must ensure the plan offers global coverage. “Global coverage offers peace of mind, ensuring they are covered even if they travel or relocate,” says Agarwal. Policies with country-of-residence or travel restrictions should be avoided.

 

Kumar advises checking the insurer’s claim settlement ratio, availability of tele/video medical check-ups, convenient payment options, and any limits on the sum insured.

 

Avoid hiding medical conditions, as this could affect claims. Also, inform the insurer of any change in residential status.

 

Monthly premium payments make it easier to manage cash flows but carry risks. “There is a higher chance of missing a payment, which can lead to the policy lapsing and impacting coverage,” says Agarwal.

 

Kumar cautions against delaying purchase, as it could jeopardise the family’s financial security.