When it comes to selling life insurance plans, you look for contacts and get referrals from your contacts after a successful sale. You are aware that you can sell life insurance plans to your clients who are resident Indians. However, do you know that Non-Resident Indians (NRIs) can also be your clients for life insurance policies?
The Insurance Regulatory and Development Authority of India (IRDAI) allows Non-Resident Indians (NRIs) to buy life insurance policies from Indian life insurance companies.
Here’s what IRDA’s rules specify for selling life insurance to NRIs–
- NRIs can buy any type of life insurance policy from Indian insurance companies.
- Insurance companies can sell policies to NRIs from their offices in India or abroad.
- The policy can be issued in Indian currency or foreign currency. Similarly, the premiums can also be paid in Indian currency or foreign currency.
- There are two ways for NRIs to buy insurance in India. They can buy the policy when they visit India personally. Or, they can buy from their country online or through correspondence. If the NRI is not present in India for buying the policy and any medical check-ups are required, such check-ups would have to be done abroad. The expenses would be borne by the NRI and the reports should be sent to India. If the insured is physically present in India while buying the policy, the costs of any medical check-ups would be paid by the insurance company itself.
- There is no premium difference when the policy is sold to NRIs. However, if the NRI resides in a country which has a high risk of death, the premiums can be increased.
- If the life insurance policy is issued in foreign currency, the premium should also be paid in foreign currency. The premium can be paid in cash or through the policyholder’s NRE (Non-Resident Rupee) /FCNR (Foreign Currency Non-Repatriable) bank account.
- If the policy is issued in Indian currency, the premium can be paid by cash or through the policyholder’s NRO (Non-Resident Ordinary) bank account.
These are the rules which govern buying a life insurance policy for NRIs. In case of claim settlements, FEMA (Foreign Exchange Management Act) rules apply. These include the following –
- If the life insurance policy is in Indian currency, claims would be paid in foreign currency only in the ratio of premiums paid in foreign currency to the total premiums payable under the plan. So, if the NRI pays 10% of the total premiums in foreign currency, 10% of the claim can be taken in foreign currency.
- If the policy is issued in Indian currency and the premium was paid from the NRO account, the claim would be credited only to the NRO account of the policyholder or the nominee.
- If the beneficiary is also an NRI and wants the claims to be paid in foreign currency, the claim can be credited to the beneficiary’s NRE or FCNR account.
- If the beneficiary is a resident Indian and the beneficiary wants the claim to be paid in foreign currency, the claim can be credited to the beneficiary’s RFC (Resident Foreign Currency) account.
The implication of taxation
If NRIs have a source of income in India, they can invest in life insurance policies and earn tax deductions under Section 80C up to Rs.1.5 lakhs. In case of claims, the maturity or death claims would be treated as tax-free income for the NRI in India. However, the claims would form a part of the NRI’s global income and the policyholder might be required to pay tax on his global income as per the tax laws of his country of residence. So, NRIs should always understand the tax laws in their country of residence before understanding the tax implications on their life insurance claims in India. Moreover, in case of life insurance claims received in India, even if the NRI’s country of residence allows it as a tax-free income, the sum assured would only be treated as tax-free income. If any bonus or addition is paid under the plan, the additional income would be taxed in the country of residence.
What should you do?
Since there is no restriction on NRIs buying insurance policies in India, you can tap into your NRI client base to increase your life insurance sales. Your NRI contacts can buy a life insurance policy in India either to save their tax on income generated in India or for their families living in India. Moreover, if the NRIs are located abroad for a specified duration, buying a life insurance policy in India is a more sensible thing to do. So, pursue your NRI clients to buy life insurance policies from you. While you would be able to increase your income your clients would be able to secure their families financially.
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