Life insurance is one of the few certainties in financial planning that can help your family recover from the tragic circumstances of losing someone they love. While the life lost cannot be decompensated, they can still have a beam of hope in overcoming their financial setbacks with a lump sum pay out or monthly allowances. Regardless of whether you reside in India or are a non-resident Indian, life insurance plans can help your family.
Life insurance for NRIs
If you have family or other loved ones in India whose financial future you wish to protect, you can purchase Indian NRI insurance. There are different NRI insurance plans with varying advantages. You can select a sum assured that will sufficiently cover the expenses of your loved ones while they plan their future finances. You will need to choose a policy tenure and pay the premiums regularly, even if you live abroad.
In the event of your demise, the beneficiaries will have to file the NRI insurance claim with your insurance provider. Upon submitting the necessary documentation, they will receive the sum assured as the death benefit.
Types of NRI insurance
There are a number of NRI insurance policies from which your family and loved ones can benefit in the event of your unfortunate demise. Here are the types of NRI insurance plans to consider:
- Endowment Plans – These are NRI insurance policies wherein you choose the sum assured and policy tenure, then pay the premiums. In the event of your demise, your loved ones receive the death benefit. However, if you survive the policy tenure, you receive the maturity benefits with a caveat.
If you are a participating insured, then you will receive bonuses along with the maturity benefit. On the other hand, if you are a non-participating insured, then you will only receive the maturity benefit, but no bonuses. - Term Insurance Plans – These are affordable NRI insurance plans available for shorter tenures at lower rates of premium. Term policies are excellent choices to secure your family’s financial interests due to the diverse types of plans available. You can choose to increase the sum assured or use it to pay back liabilities. You can even secure a term plan with a single premium pay out.
- Money-back plans – These insurance policies pay you a certain sum of money from the premiums accumulated at regular intervals. Your beneficiaries still receive the complete death benefit in the event of your demise.
- ULIPs – These Unit Linked Insurance Plans for NRIs that also cultivate a savings and investment habit. The premiums you pay are invested by the insurance provider in the current market based on your risk appetite. You receive profits from your life insurance investments, not to mention there are ULIP tax benefits for NRIs.
You can choose from a variety of available options of equity and debt funds or mix and match for a diverse portfolio. Your insurance provider takes care of the daily investment activities and you benefit from the profits during the course of your life. In the event of your demise, your beneficiaries receive the death benefit along with any remaining profits from the investments.
How NRIs can benefit from ULIPs?
ULIPs are one of the most popular life insurance options, especially for NRIs due to the advantages that they offer during the course of your life and the financial security for your family afterwards. There are a number of ULIP tax benefits for NRIs which can also benefit you, and they are as follows:
- Section 80C specifies circumstances under which all the investments made by your insurance provider on your behalf in Unit-linked markets are tax deductible up to INR 1.5 lacs.
- If the aggregate premiums paid towards ULIPs in a financial year are less than INR 1.5 lacs, they are tax deductible.
- If your ULIPs mature, i.e., you survive the tenure of the policy, then the proceeds that you receive from maturity benefits are also tax deductible if the aggregate premium is less than INR 2.5 lacs. However, this provision under Section 10(10D) is subject to certain terms and conditions.
- The death benefit that your loved ones receive in the event of your untimely demise during the policy tenure is exempted from taxes.
Aside from the ULIP tax benefits for NRIs, you need to take into consideration that the profits you make from your investments would be subject to speculation. Such investments are treated as capital gains, and long-term capital gains have their own taxation terms under Section 19. Maturity benefits as well as capital gains from investments received as proceeds with the death benefit would be subject to TDS.
Conclusion
You can compare plans and choose the best type of NRI insurance to elevate the financial protection for your family. ULIPs are excellent choices for forward-thinking NRIs to help escalate your wealth during the course of your life and help your loved ones with added benefits in the event of your demise. The ULIP tax benefits for NRIs also help you save money in the long run.
