Living abroad certainly opens a fork of benefits, but at the same time, it brings along a lot of responsibilities. NRIs quite often concern themselves with their families, their financial security, and overall future goals. Getting a job in another country and earning can definitely help in accumulating wealth quicker, but one has to plan correctly in order to safeguard that wealth. That’s why a long-term investment plan with life insurance for NRI becomes very essential.
With life insurance, people usually think only of the death benefit. Besides death benefits, life insurance can be a very powerful financial instrument for NRIs that not only helps in saving and investing but also in planning the future. This article will walk you through the best long-term investment options, which can be availed by NRIs under life insurance, with the help of simple language and clear explanations.
What Is a Long-term Investment Plan?
Long term investment means keeping money invested for a long period of time (generally 10 years or more). The main idea is to not get fast profits but rather to have a continuous and gradual increase of the amount and financial comfort. Such plans are instrumental in accomplishing humans’ major life objectives, such as education for the children, purchase of a house, retirement, and family protection.
Life insurance, plus any long-term investment plan, gives you the advantage of having two benefits at the same time. One, it strengthens the financial position of your family in case you are not there. Two, it lets your money grow gradually and securely over the years. That’s why this combination makes life insurance the best long term investment plan for NRIs.
Why Life Insurance Is Important for NRIs
Most of the time, NRIs are separated from their families by long distances. Their parents, spouse, or children might be financially dependent on them. So, if the unexpected happens, the family can experience a financial crisis. Life insurance for NRIs is one of the ways to mitigate such a risk.
Besides that, life insurance is necessary, as most NRIs still have financial ties in India. These can be home loans, personal loans, property, or family expenses. A proper insurance plan will take care of all these liabilities even when you can’t.
Besides that, life insurance gives you comfort. When you know your family is safeguarded financially, it will be easier for you to concentrate on your work and life outside your country.
Can NRIs Buy Life Insurance in India?
NRIs are allowed to purchase life insurance plans in India without any problem. Most insurance companies in India offer special policies for NRIs. Those policies are almost similar to those of residents in India, except that they have some additional requirements for documentation and payments.
NRIs have the option to get a policy while they are in India, or they can get it through the internet from wherever they are. Premium cash can come from NRE, NRO, or FCNR accounts. The whole thing should work smoothly if the documents are correctly submitted.
Types of Long Term Investment Plan Options for NRIs
Life insurance plans for NRIs come in different types. The purpose of each plan is different. The right one for you will be the one that matches your financial goals, risk comfort, and period of investment.
Term Insurance Plans
Term insurance is the most basic type of life insurance. It offers a huge life cover at a very low price. In case the policyholder dies during the policy period, the beneficiary gets the sum assured.
Even though term insurance doesn’t give you money at the end of the policy, it is really an important part of any long-term investment plan. It is the one that secures your family’s financial future and guarantees income replacement. NRIs looking for absolute protection at the minimum cost should always start with a term insurance plan.
ULIPs (Unit Linked Insurance Plans)
ULIPs have become a highly attractive option among NRIs who want to have life insurance coverage along with an investment avenue. In such plans, the part of the premium is set apart as an insurance cover, while the remaining amount is deployed into market-linked funds like equity, debt, or balanced funds.
These schemes are the best option for those who can stay invested for a longer duration. ULIPs also offer the flexibility of fund switching, which implies that you can move your investment from one fund to another depending on the stock market. Life insurance for NRIs through ULIPs is an excellent choice for individuals who are willing to take some exposure to the market and desire higher returns over the long run.
Endowment Plans
Endowment plans are one of the oldest traditional life insurance products, which assure the policyholder guaranteed returns along with providing a life cover. These plans are low risk and assure steady growth over a period. At the time of maturity, the policyholder gets the sum assured and any bonus declared, if applicable.
NRIs who value safety and are not much concerned with getting very high returns go in for endowment plans. They are perfect for setting aside money for the children’s education or marriage. As an instrument of long-term savings, endowment plans are dependable and straightforward.
Money Back Plans
Money back plans aim at providing periodic payments to the policyholders during the policy tenure. Instead of the policyholder getting the entire sum assured at the time of maturity, he/she gets a part of it at fixed intervals. The part that is left, along with the life cover benefits is paid at the time of maturity.
Such a type of plan is a great option for the NRIs who need regular income to meet the living expenses of their family in India. Money back plans give moderate returns coupled with low risk; thus, they are ideal for conservative investors.
Whole Life Insurance Plans
Whole life insurance plans are meant to cover the policyholder till his/her last breath. Generally, these plans run up to an age of 99 or 100 years. A few of the whole life plans build the cash value, which can be withdrawn later in life.
For an NRI who is focused on the long-term protection of his family and is also interested in wealth transfer, whole life insurance is a great product. It is beneficial for estate planning and provides financial security to your heirs.
Tax Benefits for NRIs
Life insurance policies in India come with the advantage of tax-saving benefits but these are contingent on the fulfillment of certain criteria. The premiums paid may be allowed as a deduction from taxable income, and the amounts received on maturity can be completely exempted from tax in case the policy complies with certain rules.
But the fact is that tax regulations across different countries are not the same. Hence, NRIs must also understand the tax implications of their country of residence. A majority of the time, Double Taxation Avoidance Agreements (DTAA) enable one to pay lower taxes. Before making an investment, it is advisable to take the help of a tax consultant.
Documents Required for Life Insurance for NRI
The documentation process is mostly easy and hassle-free. The commonly requested documents are a passport that is not expired or a work permit, proof of address both local and foreign, a PAN card, and proof of income. A few insurance plans may also need a medical test.
As soon as the documents are provided and checked, the issuance of a policy hardly takes time.
Things NRIs Should Consider Before Choosing a Plan
NRIs must be very clear about their financial goals before they pick a long-term investing plan. It is crucial to understand how long you are able to keep your money invested and what level of risk is acceptable to you.
The financial capacity and conduct of the insurer in settling the claims, their service quality, and the availability of online support should also be factored in. A good plan should be simple to handle even if you are residing abroad.
Conclusion
It is essential to plan your future irrespective of your place of residence. With a long term investment plan along with life insurance for NRI from the right choice, you can safeguard your family, augment your savings, and pursue your long-term goals without any fear.
Life insurance is definitely not a mere expenditure. It is a commitment to your family and an effective way of ensuring financial security. Being an early starter and picking the right plan can definitely give you a great advantage in the future.