Term Insurance Validity Outside India - How Does It Work, Impact & Conditions

source: indiatimes

Shifting to a foreign country is a common practice in today's day and age. It is a major step in a person's life and comes with some major challenges. One of the most common things that people may wonder about while moving abroad is whether or not their term insurance will be valid there.

Here is everything that will answer your question:

The simple answer to the question is that Persons of Indian Origin (PIOs) and Non-Resident Indians (NRIs) can avail of the benefits of term insurance plans offered by Indian insurance companies. Even if you are someone planning to move outside India for a year or two, you can get the perks of term insurance.

However, term insurance validity outside India may be subject to certain terms and conditions related to the insurance coverage.

Your term insurance policy will work even when you move out of India, if you keep paying the premiums on time. In the case of your demise in a foreign country, the nominee of your term insurance policy will receive the death benefit amount.

Term insurance works for NRIs in the same way as other term plans in India. Here are a few simple points that will help you understand the process better:

• The policyholder needs to pay a premium to the insurance provider to get an assured sum in return.
• In the event of the demise of the insured, the nominee gets the assured sum from the insurance company.
• Some policies also give their customers the advantage of Return of Premium (ROP). In this feature, an insurer will give back the entire sum of the premium, if the policyholder is surviving after the completion of the term.
• NRIs can also include additional terms called riders to their existing policy to improve the coverage of their plan.

However, you have to inform your insurance provider in advance about your plans of moving out of the country. This will put you and your insurer on the same page and reduce the chances of confusion.

Term insurance policies generally cover cases of accidental deaths when you go to a foreign country for vacations. However, if you are moving there for a year or two for jobs etc., your insurer will put you in the category of a non-resident Indian to render the benefits. Thus, if you are wondering whether term insurance is applicable for NRIs, the answer is yes.

However, certain scenarios will impact the insurance payout process and make it tricky which will be unfavourable for the policyholder.

Term insurance policies may include certain clauses that will make you and your nominee ineligible to receive the monetary benefits of the insurance. Different policy providers may have different criteria for rejecting claims for term insurance.

Here are a few such common reasons-

• Policy providers may reject the claim if beneficiaries cannot provide sufficient proof of death.
• When the policyholder's demise is under suspicious conditions or by suicide, an insurer may refuse to pay the sum.
• If the nominee does not file for a claim within the stipulated period, insurance companies may invalidate the claim.
• In case a person does not inform the insurer before moving abroad, it may result in the provider refusing the insurance benefits.
• There are certain Middle Eastern and African countries with turbulent social scenarios, where many insurance companies do not extend their facilities. 

1. Purchasing Insurance While in India

The procedure of buying a policy for you as an NRI is simple when you are in India. All you have to do is find a suitable insurance provider and ask about their policies. After completing the necessary formalities, you will be able to buy a regular term plan as an Indian.

However, you need to disclose the country of your residence since most insurance providers maintain a list of countries where they do not provide insurance. Moreover, If you have moved to a country where political instability is rampant, the insurance premiums will be higher.

2. Buying Term Insurance From Your Country of Residence

The process of purchasing a term insurance policy from outside India is a little complicated. From outside India, you have to purchase the policy through mail order. Moreover, you need to seek verification from an Indian diplomat and a notary.

As an NRI you ask for verification from an official from the Indian embassy. If you are a student residing in a foreign country, you can ask your principal, supervisor or dean for help with the verification process. 

1. Provides Financial Security

2. Provides Tax Benefits

3. You Can Customise Amounts

4. Simple and Quick Documentation

Insurance companies usually ask for some basic documents with the insurance application forms. They use these details to determine the premium amount they can offer you.

Although the answer to whether term insurance is valid outside India is positive, it is the responsibility of prospective policy buyers to check with their insurer about the same. Moreover, different insurance companies may have varied terms and conditions related to insurance policies. Make sure you read the fine print before committing to such a massive financial step.

1. Check Your Eligibility

2. Undergo Medical Examination

3. Check Mode of Premium Payment

As a person living outside India, you have several convenient options to pay term insurance premiums:

• Online Payment: Use your credit or debit card (Visa, Amex, Mastercard) for quick transactions.
• Internet Banking: Pay through your NRE (tax-free earnings from abroad) or NRO (income earned in India) accounts.
• Foreign Account SWIFT Transfer: Use SWIFT to transfer premiums from your foreign bank account to your Indian insurance provider.
• Cheque Payments: Deposit a cheque from your NRE, NRO, or FCNR account to pay premiums.

It's essential to check with your insurer for the specific payment methods they accept and any additional requirements. Figuring out your mode of payment beforehand will save you from unnecessary trouble later.

4. Know About Taxation

Before you buy an insurance policy, gather information about taxation policies on insurance in India as well as the country of your residence. In case of confusion, consult a specialist who can clear your doubts regarding taxation policies.

There are also differences in scenarios when a person is moving outside India on a temporary or permanent basis:

• Moving to a Different Country Temporarily: If you are going to a foreign country temporarily, you can opt for certain term plans that will provide death benefits to your loved ones as a lump sum amount in the case of your demise.
• Moving to a Different Country Permanently: In case you are moving to a foreign country permanently, you can check whether you fall in the category of non-resident Indians who are eligible for receiving insurance benefits in India. After checking with your preferred insurer, you can buy a policy that suits your needs and pay the premiums on time to enjoy the perks.

There are various advantages of term insurance for Indians living in a foreign country.