Term insurance for NRIs can be defined as life insurance plans specifically designed to cater to the unique protection needs of Non-resident Indians (NRIs) and their family members. These policies can be purchased from life insurance companies in India, even though the applicant is residing temporarily in a foreign country. However, such purchases and disbursals related to these life insurance plans are subject to FEMA (Foreign Exchange Management Act) guidelines and other applicable IRDAI (Insurance Regulatory and Development Authority of India) regulations.

Term insurance policies in India can be bought by different categories of applicants apart from resident Indians such as:

• Non-Resident Indians: These are citizens of India with a valid Indian passport who are temporarily residing in a foreign country.
• Person of Indian Origin (PIO)/Overseas Citizen of India (OCI): These terms refer to citizens of foreign countries other than Pakistan or Bangladesh who fulfill the below criteria –

• Applicant had held an India passport earlier
• The Applicant or his/her parents or grandparents were Indian citizens by virtue of the Citizenship Act, 1955 or Constitution of India
• The applicant is the spouse of an Indian citizen

• Foreign Nationals: This refers to citizens of a foreign country who are residing in India.
  The above groups of applicants are allowed to purchase term insurance policies in India commonly referred to as NRI life insurance plans. The eligibility criteria and documentation required for these insurance plans may vary to some extent from one insurer to another. However, one must keep in mind that term insurers in India have to follow some rules and restrictions when offering NRI life insurance to residents of some countries. This list of prohibited countries is usually available on the life insurance company’s website.

There are quite a few reasons for NRIs to purchase term insurance plans in India. Some of the key ones are:

• Ensuring financial security of dependents by compensating for loss of income in the case of the untimely demise of the policyholder
• To ensure that the burden of any unpaid or outstanding debt at the time of the policyholder’s demise does not impact the finances of your dependents and/or loved ones
• To diversify investments and avail the benefit of investing in a growing economy like India through the well-regulated Indian life insurance industry
• For availing tax benefits under Section 80C of the Income Tax Act, 1961 on any income the policyholder might earning in India

Non-resident Indians who want to purchase term insurance in India have a few different options to choose from depending on their unique requirement and life stage. Some of the popular types of NRI life insurance plans available in India are:

• NRI Term Plans: Term life insurance policies for NRIs offer death benefit similar to term plans offered to resident Indians. These are pure protection plans where the insurance company pays out the sum assured only if the policyholder does not survive the policy term. NRI term plans from most insurers also provide the option of availing add-ons like critical illness cover, accidental death and disability cover, etc. to enhance the coverage offered by the term insurance policy.
• Child Plans for NRI: NRIs can also purchase child plans to secure the future of their children in the case of unexpected demise of the policyholder. These life insurance plans are primarily designed to help NRIs save for key life goals of their children such as higher studies while providing add-on benefits like waiver of future premiums in case of the death of the policyholder parent.
• NRI Retirement Plans: Insurers in India also allow NRIs to invest in retirement plans that can provide a monthly income after retirement through purchase of annuities. These NRI plans can help them plan their retirement so that they can secure their finances even after they are no longer earning a regular income post-retirement.
• ULIPs for NRIs: Unit Linked Insurance Plans or ULIPs are insurance policies that combine the benefits of life insurance and investment in a single package. NRI ULIPs work in exactly the same way as ULIPs for Indian residents. So, the policyholder’s family members get death benefit in the case of the policyholder’s demise during the policy term. If the policyholder survives the policy term, they get returns based on the performance of the ULIP.

Term insurance policies purchased in India offer similar cover to both NRIs and resident Indians. NRIs can choose a policy payment term of their choice as per available options offered by the life insurance company. The sum assured can also be chosen by the NRI applicant as per applicant’s requirement and the policyholder’s income criteria which can differ to some extent from one insurer to another. Others factors to keep in mind are the enhanced cover options provided through policy add-ons like critical illness cover, accidental death or dismemberment benefit, terminal illness cover, etc. Last but not the least, NRI term insurance policies also offer the option of choosing different death benefit payout options such as lump sum payout, installment payouts or a combination of the two depending on the applicant’s understanding of the expected future financial needs of the policy beneficiaries.

The documentation requirements for NRIs purchasing term insurance policies in India are slightly different from the documents required if a resident Indian is purchasing a similar plan. While the list of documents required for KYC (Know Your Customer) requirements may differ slightly from one insurance company to another, below are some examples of address documents that can to be submitted purchasing a NRI term insurance policy:

• Resident Card/National Identity Card issued by Government of country of resident (including passport with overseas address)
• Driving License issued abroad containing overseas address
• Telephone/Gas/Mobile/Water or other utility bill featuring overseas address
• Copy of credit card statement with overseas address (max. 3 months old)
• Copy of valid work permit/resident permit featuring overseas address
• Employer’s certificate for proof of overseas address (also applicable to Merchant Navy applicants), etc.

In addition to the above overseas address proof, NRI term insurance applicants would also need to provide valid age proof, income proof, copy of passport, and undergo a medical test/video medical test as part of the application process. The exact KYC process may vary to some extent from one life insurance company to another.

Non-resident Indians purchasing a term insurance plan in India can be broadly classified into 2 categories – those purchasing the policy in India and those purchasing from overseas. There are some key differences in the life insurance purchase process depending on which of these categories the applicant falls into as mentioned below:

The payment of NRI term insurance policies can be done either using Indian rupee or various foreign currencies. NRIs can make premium payments in Indian currency by using cheques of NRE (Non-Resident External) Rupee Account or Non-Resident Ordinary (NRO) account.
Alternately, many insurance companies in India also allow NRI policyholders to pay premiums directly from their overseas account into the insurer’s account in India using the SWIFT network. However, there can be some restrictions in terms of accepted currencies in the case of such international remittances.
Many Indian life insurance companies also accept premium payments for policy renewal through international credit cards. Even in such cases, the first premium payment made at the time of purchase needs to be made through a NRE/NRO or Foreign currency account held with a bank in India.

As mentioned earlier, NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts are required if one wants to purchase a NRI term insurance policy. Read on to know what these accounts are:

In the case of NRI term insurance policies, bonus payouts, maturity proceeds, surrender value or payout of claims can be made in Indian rupees or in foreign currencies like US$, Euro, etc., depending on the choice of the claimant. However, insurers are required to follow some key rules with respect to such remittances:

• Insurer remittance in foreign currency are allowed only as per the proportion of premiums that have been made in foreign currency
• If premium payments are made in non-repatriable Indian rupees, payouts by the insurer are allowed only in India rupees credited to the NRO account of the beneficiary. This is also applicable in situations where death claims are settled in favor of non-resident nominees/assignees.

There can be other remittance rules for NRI term insurance plans that can differ from one life insurance company to another.

NRIs residing in the United States are required to comply with FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) rules as specified by the United States IRS (Internal Revenue Service) and India’s CBDT (Central Board of Direct Taxes) guidelines. The details of these guidelines are available on the official Income Tax Department and Reserve Bank of India (RBI) website. The key reason for implementation of FATCA/CRS compliance is to prevent US residents and citizens from avoiding tax in the US by parking wealth generated in the US in foreign countries.
FATCA/CRS declaration is currently mandatory for any NRI based in the US who is purchasing any type of life insurance policy in India. This declaration has a standardized format and needs to be filled out and submitted to the life insurance company along with the term insurance proposal form. Some of the key details that need to be provided in the FATCA/CRS declaration are – TIN (Taxpayer Identification Number), Country of Tax and overseas address of the applicant.