All You Need to Know About NRI Life Insurance Plan

Life insurance is an important part of financial planning for NRIs in India. It provides financial protection to family members and can also support long-term financial goals. However, NRIs need to understand eligibility rules, premium payment options, taxation, documentation and claim procedures before purchasing a policy in India.

Can NRIs Buy Life Insurance in India?

Yes, NRIs can generally buy life insurance policies from Indian insurance companies, subject to the insurer’s eligibility, underwriting and documentation requirements.

An NRI can purchase life insurance in India even while living abroad. The policy may be issued in Indian rupees or, where permitted, in a foreign currency.

NRIs should check the insurer’s terms before purchasing a policy because eligibility, medical requirements and documentation can vary depending on the country of residence and the type of policy.

How Can NRIs Buy Life Insurance in India?

NRIs can generally buy life insurance in India through online or offline processes, depending on the insurer.

The process may include:

• Selecting a suitable life insurance plan
• Completing the proposal form
• Providing identity and address documents
• Providing NRI and tax-residency information
• Completing medical tests, if required
• Paying the premium through an accepted payment method
• Completing the insurer’s verification and underwriting process
• Receiving the policy document after approval

Some insurers allow NRIs to complete most of the process online, while others may require additional verification or documentation.

Documents Required for NRI Life Insurance

An NRI may generally need the following documents to purchase a life insurance policy in India:

• Passport
• Visa or residence permit
• Overseas address proof
• Indian address proof, where applicable
• PAN card
• Recent photographs
• Income or employment documents, where required
• Bank account details
• FATCA, CRS and tax-residency declaration, where applicable
• Medical reports or examination reports, if required by the insurer

The exact documentation depends on the insurer, policy type, sum assured and the NRI’s country of residence.

How Can NRIs Pay Life Insurance Premiums in India?

An NRI may generally pay premiums through a banking method accepted by the insurer, such as:

• Inward remittance from an overseas bank
• NRE or FCNR account, where permitted
• NRO account, where permitted
• An Indian bank account permitted for the transaction
• International debit or credit card, if accepted
• An authorised online payment facility

The payment method may depend on whether the policy is denominated in Indian rupees or foreign currency and the applicable FEMA/RBI rules.

Tax Benefits on Life Insurance Premiums for NRIs

Life insurance premiums may qualify for tax benefits in India, subject to applicable conditions.

Under the Section 80C framework for AY 2026-27 and earlier, an eligible life insurance premium may form part of the overall ₹1.5 lakh deduction limit. From tax year 2026-27, the corresponding deduction is provided under Section 123 of the Income-tax Act, 2025, subject to the applicable conditions.

The deduction is not available under the new concessional tax regime.

Conditions for Claiming Deduction

The premium must meet the applicable conditions relating to the actual capital sum assured and the policy issue date.

For policies issued on or after April 1, 2012, the premium generally cannot exceed 10% of the actual capital sum assured for the deduction to remain available. A 15% limit may apply to policies covering a person with specified disability or disease, subject to the applicable conditions.

For policies issued before April 1, 2012, the applicable limit may be 20%.

NRIs should also check whether they are eligible to use the relevant tax regime and deduction while filing their Indian income tax return.

Taxation of Life Insurance Policy Proceeds for NRIs

The tax treatment of life insurance proceeds depends on the type of policy, premium amount, policy issue date and whether the exemption conditions are satisfied.

Taxability of ULIPs

For qualifying ULIPs issued on or after February 1, 2021, the ₹2.5 lakh aggregate annual-premium threshold is relevant, subject to applicable exceptions.

If the applicable exemption conditions are not met, the ULIP proceeds may be subject to capital gains taxation.

Taxability of Non-ULIP Life Insurance Policies

For non-ULIP life insurance policies issued on or after April 1, 2023, an aggregate annual premium exceeding ₹5 lakh may prevent the maturity proceeds from qualifying for exemption, subject to applicable exceptions.

Where a non-ULIP payout is not exempt, the taxable income is generally calculated after considering eligible premiums that have not already been claimed as a deduction. Non-exempt ULIPs follow separate capital-gains rules.

Death Benefit Exemption

Amounts received on the death of the insured are generally protected from these high-premium restrictions, subject to applicable exclusions. The Finance Act framework expressly preserves the death-benefit exception.

However, specific exclusions under the tax law, such as Keyman insurance policies, may still apply.

TDS on Life Insurance Policy Proceeds for NRIs

Tax may be deducted at source when taxable life insurance proceeds are paid.

For residents, the applicable TDS provisions generally apply to the income component of taxable life insurance proceeds. For non-residents, withholding may apply under the provisions applicable to payments chargeable to tax to non-residents.

NRIs should check the applicable TDS rate and documentation requirements based on their residential status and the nature of the payment.

How Can NRIs Receive Life Insurance Claims in India?

The claim settlement method depends on the policy terms, currency of the policy and the source of premium payment.

For rupee-denominated policies issued to persons resident outside India, payment of claims, maturity proceeds or surrender value in foreign currency is subject to the applicable RBI conditions, including the proportion of premiums paid in foreign currency.

Where permitted, proceeds paid in foreign currency may be credited to an NRE or FCNR account of the eligible beneficiary.

Where premiums were paid in non-repatriable rupees, the applicable proceeds may be payable in rupees through an NRO account, subject to the relevant rules.

What Happens if an NRI Dies During the Policy Term?

If the policyholder dies during the policy term, the nominee or beneficiary can submit a claim to the insurer.

The claim process generally involves:

1. Informing the insurance company about the death.
2. Submitting the claim form.
3. Providing the death certificate.
4. Providing the policy document and identity documents.
5. Submitting bank account details and other documents required by the insurer.
6. Completing any additional verification required by the insurer.

The insurer reviews the claim and settles it according to the policy terms and applicable regulations.

Can NRIs Surrender Their Life Insurance Policy?

Yes, an NRI can generally surrender a life insurance policy subject to the policy terms and applicable regulations.

Before surrendering the policy, the policyholder should check:

• Surrender value
• Applicable charges
• Tax implications
• Effect on life insurance coverage
• Repatriation rules for the proceeds

The tax treatment of surrender proceeds depends on whether the policy qualifies for exemption under the applicable provisions.

Free-Look Period for NRIs

NRIs should review the policy document after receiving the policy. If they decide not to continue with the policy, they may use the free-look option within the period specified in the policy and applicable regulations.

The insurer may refund the eligible premium after deducting applicable charges as permitted under the rules.

What Should NRIs Check Before Buying Life Insurance in India?

Before purchasing a life insurance policy in India, NRIs should consider:

• Policy coverage and sum assured
• Premium amount and payment frequency
• Policy term
• Currency of the policy
• Premium payment source
• Tax treatment in India
• Tax treatment in the country of residence
• Repatriation rules
• Claim settlement process
• Nominee and beneficiary details
• Medical requirements
• Policy exclusions and conditions

Tax provisions can change, so the applicable rule should be checked for the financial year or tax year in which the premium deduction or policy proceeds are claimed.