Should NRIs buy Insurance in India?
Ever since insurers threw open their doors to NRIs and PIOs, there has been a surge in policies underwritten in that sector. Many NRIs have policies which were either earlier bought in India or have been bought after becoming a NRI. The rules governing policies sold to NRIs is simple and NRIs can buy any policy at equal rates and benefits. Despite the fact, is it prudent for NRIs to buy insurance in India?
To answer the question, there are two valid points.
• Firstly, there is the cost factor. Term plans are specifically cheaper in USA, UK, Australia and so forth. The basic reason is a large customer base and an updated data base which measures the latest mortality trends. Indian insurers, on the contrary, use old mortality rates and the customer base is also low making the plans costlier comparatively.
• Secondly, though buying a policy in foreign currency is accepted, not all insurers offer this feature. They demand payments in INR only. This may raise complications as all transactions will need to be done through online remittances or NRE/FCNR account or NRO account.
• Thirdly and most importantly, there are applicable tax laws. In India, Premium payments and maturity/death benefits are both tax exempted. However, it may not be so in the NRI’s country of residence. A NRI is taxed on his global income and the maturity/death proceeds may qualify as global income in the country where the NRI resides.
Thus, to sum up, though NRIs do buy and invest in policies in India, they should do so after keeping in mind all the important factors. They may choose to invest in ULIPs or child plans and make payments in INR. Moreover, their country of residence may also exempt the maturity/death proceeds from tax. In that case, buying a policy in India would be a good option.
Should NRIs buy Insurance in India? : Should NRIs buy Insurance in India ?