1. Is the death benefit in life insurance taxable for NRIs in the USA?

No. The death benefit remains tax-free in the hands of the nominee under Section 10(10D) of the Income Tax Act of 1961 subject to certain conditions.

2. Can I get investment and life insurance under one policy?

Yes, if you are looking for a life insurance policy that also lets you invest, ULIP s can be the right choice. A part of the premium is diverted towards life insurance cover, and the remaining is invested in market-linked instruments like equity, debt, or a combination of funds depending on your risk taking ability.

3. What makes life insurance in India attractive for NRIs in the USA?

Life insurance has become one of the most basic and essential financial planning tools for anyone. For NRIs living in the USA, life insurance policies in India can be quite beneficial. There are multiple reasons why one may choose to purchase it in India, like affordable premiums, quick process, wide range of options, tax benefits, and so on.

4. Are returns on investment taxable for NRIs?

Yes. Returns on investment are termed as capital gains and are taxable at 20% for NRIs in the USA. So, if you invest through ULIPs, the returns on investment are taxable. However, you may claim tax benefits under Section 54 and Section 54EC of the Income Tax Act of 1961.²

Life Insurance Plans for NRIs in the USA

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Life insurance policies can be of different types. The varieties depend on the coverage, types of benefits, features, and premiums. You may choose a life insurance policy with only death benefits or one with a maturity benefit or one with both life insurance and investment depending on your needs. To choose the most suitable policy for your needs, make sure to assess your financial goals, risk appetite, family's financial needs, and ongoing expenses.

Here are the different types of life insurance plans in India:

Term insurance plan

One of the basic life insurance plans that provides coverage for a fixed period. These plans usually don’t offer any maturity benefits, making them more affordable. However, if you choose the refund of premium option, the premiums paid are returned on maturity. Term plans provide life coverage and pay a death benefit if the life assured passes away during the policy term. NRIs in the USA can also buy term plans in India at lower premiums and enjoy the benefit of rupee-based investments while protecting their families.
Endowment policy

This is a savings-oriented life insurance plan that covers the risk of premature demise and also has a maturity benefit. If the life assured passes away during the policy term, a death benefit is paid. On the other hand, if the life assured is alive when the policy matures, a maturity benefit is paid.
Unit Linked Insurance Plan (ULIP)

This plan offers dual benefits—life insurance coverage and wealth building. Premiums are split between life cover and investment, allowing the policyholder to participate in the financial market and earn market-linked returns. There are also the flexible benefits of partial withdrawals and switching. ULIPs are popular among NRIs as these plans allow investments in market-linked funds alongside providing life insurance cover and tax benefits under Indian tax laws.
Money Back Policy

Similar to an endowment policy, but with periodic payouts during the policy term. These survival benefits are distributed over the policy's duration.
Whole Life Policy

This insurance policy offers coverage for the life assured's entire life. The policy covers the life assured up to 99 or 100 years of age. In case of death during the coverage term, a death benefit is paid. However, if the life assured survives the tenure, a maturity benefit is paid.
Child Plan

Child plans to secure a child's financial future often include an inbuilt premium waiver, where the insurer covers premium payments if the parent passes away, ensuring the plan continues.
Annuity/Pension Plan

Annuity Plans accumulate premiums as assets and pay them out as regular income (annuity) or a lump sum after retirement, based on the policyholder's preferences.

You may wonder why NRIs in the USA should purchase life insurance in India. There are multiple reasons that attract the interest of NRIs. Some of the most common and striking reasons why you should purchase life insurance in India are:

Affordable Policies

Compared to various countries, the premium for life insurance policies in India is quite affordable. This is one of the reasons why NRIs in the USA and elsewhere choose to opt for India when it comes to quality and affordable life insurance policies. Explore various options to choose the most suitable one.
Hassle-Free Processes

NRIs in the USA can purchase a life insurance policy in no time. The process for purchasing the policy is simple, easy, and quick. Not only this, but the process of claiming policy benefits is also quick.
Tax Benefits²

The premium paid for life insurance can be claimed for up to ₹1.5 lakh under Section 80C of the Income Tax Act of 1961 under old tax regime. Not only this, but NRIs in the USA can also claim tax benefits on the death benefit as well as the maturity benefit.
Multiple Options

Not everyone has the same expectations from a life insurance policy. While some may only look for pure life cover, some may also want fixed returns, and some may be looking for investment and insurance under one roof. Whatever your requirements, life insurance policies in India cater to your varying needs.
A Policy That Covers You Globally

One of the best parts about life insurance in India is that you may get global coverage. Even if you plan to change your country of residence from the US to a different one, your life insurance may remain intact. However, you may definitely inform your insurance provider about your plan to move.