6 Must-Have Features to Look for in NRI Term Insurance Plans | Protective Insurance - 2

We have seen in the previous section about the advantages of term insurance plans. Now let us look at the 10 things to consider while taking term insurance in detail.

 

1. Term insurance sum assured:

The policyholder should plan properly how much term insurance he should take. While planning, it is important to consider various factors like one's current standard of living, income of other family members, future goals, value of their assets, current debt amount etc. If you are confused in choosing the right term insurance coverage amount, you can contact qualified insurance agents and financial advisors.

If you take term insurance for ₹2 crore, you will get about Rs. 1.33 lakh per month when you invest it in plans that give an annual return of about 8%. Thus, you should take a policy keeping in mind how much money you can withdraw from the coverage amount. There is a proverb that says, even if an elephant is alive, it is worth a thousand gold, and even if it dies, it is worth a thousand gold. Accordingly, even if the policyholder dies due to any unfortunate incident, the coverage should be determined based on the pooled fund required to meet all the goals of his family at the current standard of living without his salary.

If you take a small policy because the premium amount is slightly lower, you will not get the full insurance benefit. If you are unable to pay a high premium in the current situation according to the high coverage amount, you can take a policy for a slightly lower amount now and increase the coverage amount when your salary increases. There are suitable policies for that.

2. Policy from a safe company

While taking a policy, it is also important to choose an insurance company with the right coverage. It is important to keep in mind what the claim settlement ratio of the company is. Term insurance plans are offered by LIC, SBI Life, HDFC Life, Tata AIA. Life Insurance, Aditya Birla Sun Life Insurance, ICICI Prudential Life Insurance are all offering it.

You need to consider various factors like the company's credibility, customer service, terms and conditions of the plan, and exclusions to choose the right plan. Now you can easily apply for term insurance plans from abroad by applying digitally. You can take a policy by contacting the agents of these companies or by contacting the company's branches directly.

3. Premium Payment Currency

Since the policyholder is working abroad, he can pay the premium amount in Indian Rupees or in a foreign currency. The compensation amount will be paid in the same currency as the payment. For example, if a person pays the premium in US dollars, if any mishap happens to him, the compensation will be paid to the family in US dollars.

4. Bank Account:

Norwegian Indians generally use 3 types of bank accounts to transact in India.

NRO Account:

NRO (NRO - Non Resident Ordinary) account is a bank account used by Indians living abroad to manage the money they earn in India. This income can be in the form of salary, rent, interest, dividends, etc.

NRE Account:

NRE (NRE - Non Resident External) account is an account that helps Indians living abroad save the money they earn abroad in India. It can also be referred to as a non-resident foreign account. This is an account that transfers money earned abroad in various ways such as salary, business, profits from foreign stock markets to our Indian bank account.

FCNR Account:

In FCNR (Foreign currency non-repatriable account), you can invest the income earned abroad in the currency of that country. This account can be opened in major currencies like US Dollar, Euro, British Pound, Singapore Dollar. Investments made in these types of accounts cannot be taken back abroad.

Term insurance premium can be paid through any of the three bank accounts mentioned above. NRE and FCNR accounts can be used to pay premium in foreign currencies for term insurance policies. NRO accounts can be used to pay premium in Indian Rupees. When paying premium in foreign currencies, you can protect yourself from the depreciation of the Indian Rupee. However, it is better to choose the right premium payment method by calculating other factors such as income tax on the compensation amount.

5. Premium payment period:

The premium amount can be selected as per the policyholder's choice, once a year / once in 6 months / once in 3 months / once in a month. When paying the premium once a year, the premium amount will be slightly less. Moreover, that will be correct. If you choose the option of paying the premium monthly, the policy will lapse if you forget to pay the premium. When it is said once a year, there is a chance to pay the premium correctly.

6. Income Tax Benefits:

If you pay the premium abroad through NRE accounts, the maturity amount received by the policyholder in the event of an accident will be available in foreign currency. That money will have to be taxed as per the income tax law of that country. On the contrary, when paying the premium in Indian rupees, the compensation money will be credited in Indian rupees. This entire amount will be fully tax exempt under Section 10 (100) of the Income Tax Act. Income Tax Section 10 emphasizes that the money received by the heir from the insurance company is not considered as income to a person.

Therefore, the entire compensation amount can be used by the family of the policyholder without paying any income tax. Also, the premium amount paid is eligible for income tax relief up to Rs. 1.50 lakh per year under Section 80C of the Income Tax Act under the old income tax regime. Therefore, it is better to know the income tax benefits completely while choosing a policy. If you have to pay 30% income tax if you get money abroad, it is better to keep the investment in Indian rupees.

In this section, we are looking at the things to keep in mind while taking term insurance. We will see the continuation of the things to keep in mind in the following sections.