Most non-resident Indians (NRIs) are known to be financially savvy. They tend to have a diverse portfolio of investments, in both the immigrating country and India. Undoubtedly, they are aware that insurance plays a critical role in safeguarding the physical and financial well-being of the family. But the question that begs to be asked is: do they need to have insurance in India if they aren’t here?
To understand the need for health and life insurance in India as an NRI, the primary question one needs to ask is whether you will continue to have personal and financial interest in India over the long-term. If the answer is ‘yes,’ then buying insurance or continuing with an existing plan should be on the agenda. Before we touch upon the reasons why non-residents should consider domestic insurance coverage, let’s understand how the change in domiciliary status affects eligibility.
How does change in residency affect NRIs?
Most life insurance plans offer a global coverage, and a change in residency status does not affect the validity of an insurance plan. Even if something unfortunate happens to you outside India, your beneficiaries can receive the claim benefits.
If you have an existing life insurance plan and are looking to immigrate, it is recommended that you update your insurance provider regarding the change in residency. Some insurers may require a declaration. Usually, there is no difference in the premium for resident or non-resident policyholders. However, your service provider may re-evaluate the terms of insurance if the country you are relocating to is considered as ‘high-risk’ on account of civil or political unrest, high crime rate or poor standard of living.
Non-residents can continue their existing plans or purchase a new one, either in India or in their destination country. Ideally, you should do so while visiting India as it saves you additional administrative and medical costs, which you would have to bear for proposing a new policy while abroad.
Also read: COVID crisis: Money matters NRIs must fix before returning to India for good
Health insurance benefits, on the other hand, can only be claimed within India or the geographical limits as specified in your health plan. The protection of health insurance kicks in when you are within domiciliary jurisdiction, but stands pretty much redundant (for self) when abroad. Those who shuttle frequently are better off with separate health plans for each location.
Reasons to consider domestic insurance
Affordability: Insurance costs, especially health insurance in India is amongst the cheapest in the world. While the average annual health plan in India costs about Rs 10,000 to Rs 15,000, the average American resident pays about US$6,000 (Rs 4.4 lakh) for a similar cover. Inexpensive healthcare service, low insurance penetration, government incentives and non-predatory guidelines from IRDAI are some of the factors that keep insurance costs in check.
Safeguard family’s interest: Life insurance serves as a financial safety net for your dependants in India (if any). It ensures a secure future for your spouse/ parents and continued education for children, amongst other shared goals. The proceeds can also be used to settle any outstanding loans and liabilities you may have such as a home loan or car loan, thereby securing an asset for the family.
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Continued benefits: Health issues can spring up at any time. Having a domestic health plan mitigates the financial risk of any unanticipated health scare while you are here. You may also need to continue with a health insurance plan if you are the primary policyholder of a group, or a family floater plan, wherein the other beneficiaries are residing in India.
It should also be noted that there is a mandatory waiting period for most critical illnesses. By investing in a health plan at an early age, you can tide over the waiting period and be eligible for insurance benefits if any major health issue pops up later. This benefit can be invaluable if you intend to move back to India permanently in the future, or even take advantage of the inexpensive advanced medical facilities in the event of diagnosis of a critical illness.
Save tax: NRIs who earn a passive source of income in India through investments, rent, etc. can offset a part of their tax liability corresponding to the amount paid for life and/or health insurance premiums under Section 80C and 80D, respectively. This is applicable in select income cases where slab rates apply, and may not be valid for special rates like in the case of equity (any duration) and debt (long-term).
In closing
Make sure you understand all the terms and conditions regarding payment processes and repatriation (if applicable), tax implications in India as well as the immigrating country. The right set of insurance plans can prove to be strategic tools for achieving your long-term goals and safeguarding your loved ones.
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