Insurance for NRIs – How to choose?

Non-resident Indians (NRIs) are allowed to buy life insurance policies in India. Thanks to the digital mode, they can easily buy the plan from the country that they live in and get insured against the risk of premature demise. Moreover, with the different types of life insurance plans available, NRIs can –

• Create a corpus for their financial goals
• Get tax benefits
• Diversify their portfolio by investing in Unit Linked Insurance Plans (ULIPs)
• Get a financial security for their loved ones

When it comes to buying insurance for NRIs, there are multiple options available in the market. Different insurers offer a range of insurance plans and NRIs are spoilt for choice. In such a case, how can they choose a suitable policy?

There are some ways in which NRIs can choose a suitable life insurance policy for themselves. These ways are discussed below –

How Can NRIs Choose The Suitable Life Insurance Policy?

Comparison can help you find the suitable life insurance policy from the multiple options available in the market. However, before you compare, there are some things that you should keep in mind to shortlist the type of policy that you need. These things are as follows –

1. Your financial goals

Your financial goals helps you determine the type of policy you want. Given the different types of life insurance plans available, you can find the suitable plan depending on your financial goals. For instance –

• If you want to create a corpus for your child’s education and/or marriage, a child insurance plan may be apt
• For retirement planning goals, a pension plan may make sense
• If protection is your primary need, you may opt for a term insurance plan
• For wealth creation goals, you may choose ULIPs or traditional life insurance plans like endowment and money-back.

2. Priority of the goals and the corpus required

Once you have identified your goals, list down their priority, i.e., which goal needs to be met first and which is a long-term one. This will help you prioritise your life insurance purchases too. For instance, if protection is a priority, you may first buy a term insurance plan. Thereafter, when you get married and start a family, you may choose a child insurance plan.

After prioritising your goals, assess the corpus needed for fulfilling them. This would help you choose a suitable sum assured for the policy that you buy. When estimating the corpus, try and factor in inflation so that you can plan optimally.

3. Existing assets and liabilities

If you have existing assets, they can pay for your financial goals. As such, you can reduce their value from the aggregate corpus needed for your goals. Similarly, if you have liabilities, you need to factor in their repayment in your absence. As such, their value should be added to the estimated corpus.

For instance, say you want to save up for your child’s marriage which you estimate would cost ₹50 lakhs. You have existing investments worth ₹20 lakhs and no liabilities. In this case, you may want to choose a sum assured of ₹30 lakhs when buying the policy. On the other hand, if you have existing liabilities of ₹10 lakhs, a corpus of ₹40 lakhs would be needed to pay off the liabilities and also meet the goal.

So, assess your portfolio and figure out the optimal sum assured for the life insurance plan.

4. Number of dependents

The number of financial dependents would also affect the choice of the sum assured. If a lot of family members depend on you financially, you would need a higher sum assured and vice versa.

You can use the life insurance calculator, an online tool, and assess the optimal sum assured basis your financial goals. Once you have identified your needs and know the type of policy that you want, the next step is to compare the available plans and choose the suitable one. To compare, here are some parameters that can help you find a suitable plan –

1. Coverage offered:

Check out the coverage benefits of the policy. Besides covering premature demise, find out the additional features of the policy like bonus, guaranteed additions, add-on riders, income options, etc.

You can choose a policy that offers suitable coverage benefits so that you get a comprehensive scope of protection.

2. Riders available:

Riders can enhance the scope of the policy. Look for the available riders and choose those which align with your coverage needs.

3. Premium rates:

Compare the premium rates along with the coverage of the policy and not independently. This is because a policy with affordable premiums might offer low coverage too. The preferable policy would be the one that offers competitive premiums without compromising on the coverage benefits.

4. Claim process and history:

Lastly, check the claim process of the insurance company. Since you are living abroad, a digitised and simple claim process is feasible so that claims can be made easily. So, look for companies that offer a simplified claim process which can be followed online for ease and convenience.

Secondly, check the company’s past claim record which can be found through its Claim Settlement Ratio (CSR). The ratio denotes the percentage of claims settled against the total claims made.

Wrapping Up

Life insurance is an important financial tool, whether you are an NRI or a resident individual. It can help you plan for your financial goals and also provide financial security to your family, in your absence. So, use the aforementioned tips and find the suitable policy for your coverage needs.

General References

1.https://www.livemint.com/money/personal-finance/key-factors-nris-should-consider-before-buying-a-life-insurance-policy-11642611828485.html#:~:text=They%20should%20assess%20the%20policy,to%20the%20insurer%20in%20India.

2.https://economictimes.indiatimes.com/markets/expert-view/why-is-it-lucrative-for-nris-to-buy-health-and-life-insurance-in-india/articleshow/104483050.cms?from=mdr

3. https://indianexpress.com/article/business/banking-and-finance/how-nris-can-buy-a-life-insurance-plan-in-india-5678196/

4. https://www.tomorrowmakers.com/insurance-basics/what-should-nris-keep-mind-while-purchasing-life-insurance-india-article

5. https://www.moneycontrol.com/news/business/personal-finance/can-nris-purchase-life-insurance-in-india-3666241.html

BJAZ-WEB-EC-04892/23