You don’t have to be an Indian citizen to buy life insurance in India

Published in Mint on 26th December 2017. Written by Abhishek Bondia

I am 32, currently working in Australia on a long-term contract. I have married an Australian citizen. Can I and my family (including my Australian wife) buy life insurance in India? If my children are born in Australia, will I be allowed to buy life insurance for them in India as well?

Shamsher Tiwari

Yes, you can. You do not have to be an Indian citizen to buy life insurance in India. You should plan to buy the policy when you are in the country next. This will aid you in completing the issuance process smoothly. Typically, you would be required to go through a medical underwriting process for which you have to be physically present. Your wife and children can also buy insurance from India in the manner described above.

I want to buy a term plan of Rs2 crore. If the policy is claimed by my family, will they get exactly Rs2 crore, or will some charges be deducted? If there are changes, should I increase the sum to Rs2 crore-plus so my family gets at least Rs2 crore? 

—Anjan Wadhwa

Term insurance pays nominees the exact sum assured as specified in the policy. If your sum assured is Rs2 crore, your nominee will receive this amount. No charges are supposed to be deducted from this. You should ensure that premiums are duly paid during the term of the policy.

How do I find out the mortality charges levied in life insurance policy? 

—Swati Thakur

In unit-linked investment plans (Ulips), mortality charges are levied for the component of life cover in the policy. Typically, insurers charge this by reducing the number of units accrued in the policy. You can ask the insurer for a policy statement for the most recent period. In an itemized statement, deduction towards mortality charges would be clearly highlighted. If not clearly tabulated in the statement, you can multiply the number of units deducted with the prevailing net asset value (NAV) rate to arrive at the absolute amount of the charges. Insurers typically publish the mortality charges table for their Ulips separately. This table illustrates the charges age-wise. The entire premium for term insurance policies goes towards mortality charges. For endowment products, break-up of mortality charges are not available.

What is the meaning of transfer of life insurance policy? 

—Abeer Guleja

Life insurance policies cannot be transferred but can be assigned. After assignment, the proceeds from the policy are received by the assignee instead of the nominee. Typically, lending institutions insist on assignment of life insurance policies. This is done to cover their loan extended to the insured. In case of the insured’s death, the sum assured is paid to the lending institution.

Can I take a loan against my endowment plan? Are there any other types of policies against which a loan can be taken? What happens in case of default? 

—Sabeer A.

Yes, you can take a loan against your endowment plan. Typically, the loan amount is less than the surrender value in the policy. For example, some policies would restrict that maximum loan that can be extended under the policy to 90% of the sum assured. Surrender value is the cash value of a policy. The policy acts as surety for the loan. Other investment-linked life insurance policies are not allowed to offer loan facility.

I am 55 years old and I bought a house 5 years ago on a 20-year-loan of Rs50 lakh. The loan amount will be serviced comfortably with the pension that I get and a small contribution from my son. All of us live in the same house now. I have a term life cover till age 60 of Rs1 crore sum assured. Should I look to have life insurance cover beyond 60 years of age? Is it somehow possible to extend my existing term policy to 75 years? If not, is it advisable for me to buy insurance at this age?

—Janardan Singh

It seems your son is independent and has an income. So, your expenses around children’s education is perhaps already covered. If you do not have any other liabilities, then your key purpose of buying a life insurance would be to pay off the home loan in case of your death, and maintain a regular income stream for your spouse. In case your pension accrues to your spouse after your death, then you may not want to buy life cover after 60. However, if that is not the case, then you should buy a life cover now. After retirement, it will be difficult for you to get a life insurance. You will have to buy a new policy as your existing insurance policy cannot be extended.

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