How HNI NRIs should calculate their term insurance coverage

Economic Times

6 days ago

For high-net-worth individuals (HNIs) living abroad, protecting their family's financial future isn't just a responsibility; it's a priority. Amidst managing global investments, overseas income, and rising living costs, one instrument stands out for its simplicity and impact: term insurance. It is the most straightforward form of life insurance, offering a significant sum assured for relatively low premiums. For NRIs (Non-Resident Indians), the need for term insurance is even more pronounced, as they left the country to earn better and provide better security and quality of life to their family. But as important as the decision to buy term insurance is, equally important is deciding how much coverage to take and where to buy it from.
The ideal term cover for NRIs
HNIs often have complex financial profiles, ranging from high annual incomes to international assets, but their lifestyle needs and long-term commitments are just as substantial. A good starting point is to aim for a life cover of at least 10 times one's annual income. However, for an HNI NRI, this may only serve as a base. Factors like inflation, currency fluctuation, cost of children's education, care for elderly parents, and outstanding liabilities should all be taken into account. For instance, an NRI earning Rs 50 lakh annually may technically need a cover of Rs 5 crore but if their children are expected to study abroad, or if their spouse is not working, the ideal cover could easily go up to Rs 7 to 10 crore. It's about ensuring that the family continues to enjoy the same standard of living, even in the absence of the breadwinner, without having to compromise on goals and responsibilities.
Moreover, the financial environment in which these NRIs operate is dynamic. Exchange rate volatility can erode the value of remittances. Inflation, particularly around healthcare and education, has been persistently high. This means that a flat, one-size-fits-all cover isn't sufficient. It must be tailored to the family's real-world needs and ambitions. And when it comes to actually purchasing the term plan, many HNI NRIs might instinctively look to insurers in their country of residence. But a closer comparison reveals that buying a policy from India not only makes more financial sense but also offers greater flexibility and long-term value.
Where to buy your term insurance
One of the most compelling reasons to choose an Indian insurer is cost. Premiums for term insurance in India are significantly lower, often ranging from 20% to 50% cheaper compared to insurers in the US, Singapore, Middle East etc. These savings can add up to several lakhs over the policy term, particularly when the sum assured is large. Additionally, NRIs are entitled to an 18% GST waiver on premium payments for term insurance. This makes an already affordable product even more attractive.
Benefits unique to India
Another unique advantage is the option of a special exit or refund of premium. Under this feature, if the policyholder survives the entire term of the plan, all premiums paid are refunded in certain schemes. This adds a layer of psychological reassurance. You are protected throughout, and if nothing goes wrong, you get your money back. Most overseas insurers do not offer such a feature in their term plans.Indian term plans also offer an increasingly important feature for globally mobile individuals: worldwide coverage. NRIs who take a policy from India continue to be covered even if they relocate to another country or choose to return to India at a later stage. This flexibility is crucial in a world where career moves, migrations, or retirement plans can shift unexpectedly. As long as the policyholder maintains the policy in good standing, the coverage remains intact regardless of changes in residency. It offers peace of mind that one's protection doesn't get restricted by borders.The process of buying term insurance from India has also become more seamless for NRIs. Video medicals have now become the norm, eliminating the need for physical travel or cumbersome medical appointments abroad. Everything from application to underwriting can be handled remotely, making it a convenient experience despite time zones and geography.Lastly, the payout from term insurance bought in India is entirely tax-free under Indian law. This ensures that your family receives the full benefit without any deductions, regardless of the claim size. In a time of emotional distress, the last thing families need is a complicated tax situation or a reduced payout.Term insurance is a vital pillar in the financial planning of any HNI NRI. It serves not just to replace income but also to preserve lifestyle, dignity, and future dreams. While the ideal cover should be based on a comprehensive assessment of family needs, inflation, and long-term goals, it is equally important to choose the right policy from the right geography.With competitive pricing, high claim reliability, tax efficiency, and customer-centric features, India emerges as the obvious choice for NRIs looking to secure their future. It is a protection strategy rooted in value, both emotional and financial, and built to stand the test of time. (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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