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Understanding NRI Life Insurance Claim Process

TeamAckoDec 20, 2024

Making a Life Insurance claim can be challenging for NRI policyholders abroad. However, insurers offer simplified claiming processes and enhanced assistance to families in India for timely payouts. Understanding the claim procedures, documentation requirements, online facilities, and settlement timelines is essential.

NRIs can secure Life Insurance benefits for their beneficiaries, even when living abroad. Nominees must submit essential documents like the death certificate, policy details, and embassy-attested paperwork to ensure smooth processing with the Indian insurer.

Claim

Contents

How Does NRI Life Insurance Claims Work?
Types of Life Insurance Policies For NRIs
Documentation for NRI Life Insurance Claim
Claim Settlement Process for NRIs: Step-By-Step Guide
Tax Implications and Key Considerations for Life Insurance Claims in India
4 Key Benefits of Life Insurance Claims
Considerations and Limitations in Life Insurance Claim Settlements
Life Insurance Claim Settlement: Practical Tips for Beneficiaries
6 Benefits of Life Insurance to NRIs
Is Term Insurance Valid Outside India?
What Happens if the Proposer Dies in Life Insurance?
- Proposer is also the Insured:
- Proposer is Different from the Insured:
Conclusion
Frequently Asked Questions

What are Life Insurance Claims?

A Life Insurance claim is the process through which the policyholder or the policy's beneficiaries formally notify the insurance provider of an event that triggers the policy payout. This payout is the assured amount that the insurer is legally bound to transfer to the legitimate beneficiaries.

For most life insurance companies, the primary claimable event is the insured person's death during the policy tenure. This could be due to natural causes, accidents, illnesses, etc. In such events, the insured person’s nominee/appointee or family members should initiate a formal claim request with the insurer.

This would involve intimating the insurer of the death through a standardised claim form. Other mandatory documents like death certificate proofs, medical reports, police reports, etc., must also be submitted as part of this claims process.

How Does NRI Life Insurance Claims Work?

When an NRI policyholder unfortunately passes away during the policy coverage duration, the nominee/beneficiary should initiate the Life Insurance claim process. One will have to inform the insurer within 90 days and submit documents like purchase proof, death certificate, and identity evidence through online/offline modes.

The insurer then investigates the cause of death, verifies documents thoroughly, and may interview the claimant before processing the request based on merits. Once satisfied, the settlement is typically made within 1-2 months, subject to policy terms. Contacting overseas assistance desks expedites the process.

Types of Life Insurance Policies For NRIs

NRIs can buy insurance plans like Term, Endowment, and Money-back policies, which cater to their specific needs and provide flexibility and affordability — alongside financial stability in challenging times.

Term Insurance Plans

NRIs can choose Term Insurance plans, which offer coverage for a specific term, ranging from 10 to 30 years.
Choose a sizable life coverage amount based on family income replacement needs.
The premium remains unchanged annually based on entry age for the entire coverage duration.
Perfect for financially securing dependents like children and spouses against loss of income.
Add-ons like accidental death and disability covers can enhance protection.

Endowment Policies

Endowment policies combine Life Insurance and savings, where the policyholder receives maturity proceeds at the end of the term.
Offer life coverage for pre-defined periods like 10, 15 or 20 years.
Maturity benefits in the form of lumpsum payouts are guaranteed if the insured survives full-term.
Built-in savings component that forces policyholders to save systematically.
A helpful source for financing future goals like children’s global higher education.
It can be customised with premium paying variants as per affordability.

Unit Linked Insurance Plans (ULIPs)

Unit Linked Insurance Plans (ULIPs) offer investment and insurance components, allowing policyholders to invest in various funds.
Lock-in capital for medium to long-term wealth creation while enjoying life cover.
The investment fund portfolio includes equity, debts, and money markets across cap sizes.
Returns are directly linked to capital market performance over tenure.
Changing asset allocation between funds allowed for the balance of risks.
Ideal for high-risk appetite young earners below 45 years.

Whole Life Policies

Whole-life policies offer lifetime coverage and may have a monetary value that can be borrowed against or withdrawn.
Enable policyholders to achieve financial security across their entire lifetime.
Builds up a steady cash value that can be borrowed against in emergencies.
Useful legacy planning and estate transfer tool for wealthy individuals.
Premiums are structured to suit continuity and ease for policyholders.

Pension Plans

Pension plans help build a retirement corpus with regular investments and provide annuity payments after retirement.
Vesting is mostly aligned with typical retirement age milestones.
Systematic vesting withdrawals using in-built savings corpus creation.
Corpus is also passed on to beneficiaries in case of sudden demise post-retirement.
Ensure financially independent sunset years of life.
Choose wisely based on financial needs, investment goals, and risk appetite, as each policy has advantages and disadvantages.

Documentation for NRI Life Insurance Claim

Here are the documents that may be required to file a claim.

1. Original Policy Document

NRI Life Insurance claims require the original policy document. The original policy document is the legal contract signed between the insurer and policyholder, proving the existence of active insurance coverage. It captures critical details like:

Name of the insured members
Assured sum or total coverage amount
Premium payment terms
Policy validity tenure
Claims processing guidelines
Exclusion clauses

Submitting this vital document establishes the bonafide of the claimant to proceed with the settlement requests rightfully. It is crucial to keep the documents safe and accessible to speed up investigations and benefit disbursements.

2. Death Certificate

The death certificate is a legally recognised document that confirms the following:

The exact date of demise of the policyholder
The location where the death event occurred
Medical cause and circumstances that resulted in death
Photograph of the deceased policyholder
Appropriate attestation, if issued by foreign authorities

This document allows insurers to tally policy validity based on the term and assess claim admissibility factors appropriately. Unnatural deaths may require post-mortem reports and FIR. Keep all documents handy during the claims process.

3. Proof of Identity

You need ID and address proof of the deceased and beneficiary to claim NRI Life Insurance. The proof of identity establishes that:

The claimant was rightfully named as a nominee by the deceased account holder.
Confirm their full legal name and age.
Supports any relationship declarations with the now-deceased member.
Enables insurers to endorse payouts to appropriate beneficiaries.
Documents like passports, PAN cards, or driving licenses can be valid KYC proofs.
All documents should be accurate and up-to-date to avoid delays or rejection of claims.

4. Decree Absolute (if a spouse makes a claim)

The spouse making an NRI Life Insurance claim may require a Decree Absolute document. NRIs need to be aware of Indian laws regarding who can receive benefits from their Life Insurance policy after a divorce. Consult with a financial advisor/lawyer to protect assets and ensure funds go where intended. Keep documents up-to-date and accessible for unexpected events like illness or untimely death.

The decree absolute issued by the court establishes:

Date of dissolution of marriage legally
Rights of parties post-divorce
Any special insurance proceeds considerations
This upholds the spouse's authority to claim policy benefits.

5. Succession Certificate

NRIs must apply to court and provide relevant documents such as birth, marriage, and death certificates to prove their claim. In situations without explicit beneficiary nomination or disputes, the succession certificate by the court clarifies the following:

The accurate heir hierarchy as per the relationship
Seniority for considering claim eligibility
Resolves conflict between claimant groups
Ensures settlement as per legal heir chronology

Claim Settlement Process for NRIs: Step-By-Step Guide

1. Intimation of death to the insurance company

Be aware of specific timelines for intimation and documents required by the insurer, such as a medical certificate or police report. To avoid complications, familiarise yourself with policy terms and conditions and ensure smoother claims.

2. Submission of necessary documents and forms

The following documents may be required to file a claim.

Claim form: A completed and signed form submitted to the insurer.
Original policy document: The original and a photocopy. If lost, an indemnity bond is needed.
Death certificate: An original or attested certificate from a local authority.
Medical certificates: Submit copies of hospital records and medical certificates (if applicable) showing treatment given before death.
Employer certificate (if applicable): For accidental death cases, submit a copy of the FIR lodged with the police station and the employer's certificate stating no negligence by the employee.
Postmortem report (if applicable): Submit a postmortem report in case of sudden or accidental deaths.
Address and identity proof: Provide current address proof and valid ID proof such as passport, driving licence, or PAN card copy.
GST exemption form (if applicable): Relevant documents to get a refund for taxes paid in India.
Questionnaire (if applicable): Additional questionnaires to be filled out by nominees/beneficiaries providing necessary information.

3. Claim investigation by the insurer

The process can take up to three months, and additional documents may be requested for clarification.

4. Approval and disbursement of the claim amount

Here are key points to remember.

Claim amount: The insurance company disburses the claim amount to the nominee/beneficiary within a stipulated time frame, in Rupees or foreign currency as per policy terms.
Deductions: The insurer may deduct charges such as service tax, CESS, or any outstanding dues the policyholder owes at death.
Multiple nominees: With multiple nominees, the claim amount will be divided based on their respective shares as per the policy document.
Verification: If discrepancies or inconsistencies are found, the insurer may request additional documents/information from the nominee or beneficiary.
Payment options: The insurer may offer lump-sum payment, instalments, or annuity payouts based on policy terms and conditions.

Remember, timely submission of required documents and accurate information can help expedite the NRI life insurance claim settlement process.

Tax Implications and Key Considerations for Life Insurance Claims in India

Evaluating the tax consequences and other considerations of Life Insurance claim settlements in India involves understanding tax exemptions, policy benefits, and practical factors affecting payouts:

1. Tax Exemption Under Section 10(10D):

In India, the death claim received by the nominee under a Life Insurance policy is generally exempt from income tax under Section 10(10D) of the Income Tax Act, 1961. This section allows for tax-free treatment of death claims, subject to specific conditions.

This exemption applies regardless of the amount received, which means the beneficiary can obtain the full claim amount without paying any taxes, provided the policy meets the eligibility criteria for exemption.

2. Criteria for Tax Exemption:

For policies issued after April 1, 2012, the premium payable on the policy should not exceed 10% of the sum assured to qualify for the tax exemption.
Payouts from death claims are typically also exempt under Section 10(10D), as they are part of the primary death benefit. However, separate “rider” payments like critical illness benefits may attract tax under specific circumstances.

3. Section 194DA for Other Payouts:

If the policy does not meet these exemption conditions (for example, high premium-to-sum ratios in some cases), then a TDS of 5% is deducted by the insurer on payouts over ₹1 lakh under Section 194DA. However, this generally applies more to maturity claims than death claims.

4. Interest on Delayed Claims:

Any interest earned due to delayed claim payouts (e.g., where the insurer took longer than the usual timeframe) is taxable as income from other sources in the hands of the beneficiary. This interest is separate from the death claim and is not covered under Section 10(10D).

4 Key Benefits of Life Insurance Claims

Financial security for dependents:

A Life Insurance claim provides a significant financial cushion for the deceased policyholder’s dependents, helping them manage expenses, debts, or future goals (like education or retirement) without tax burdens if the policy meets Section 10(10D) criteria.

Quick and hassle-free processing:

Insurers must settle claims within a specified period (30–90 days, depending on investigation needs). This timeline ensures timely disbursement, giving beneficiaries quick access to funds when they need it the most.

Transparent Regulations and Policyholder Protections:

India's Insurance Regulatory and Development Authority of India (IRDAI) regulates the industry, setting stringent guidelines for transparency, fair practices, and redress mechanisms that enhance the claimant’s rights and streamline the claim process.

Avoidance of Probate or Legal Complexities:

Life Insurance claims are generally straightforward and bypass the often lengthy probate or succession process, making them an ideal option for providing immediate liquidity to beneficiaries without legal delays.

Considerations and Limitations in Life Insurance Claim Settlements

Impact of Early Claims or Policies in Initial Years:

If the policyholder passes away within the first three years of the policy, the insurer may conduct a detailed investigation to confirm the cause of death and validate information provided at the time of application. This can result in a delay in the claim settlement process.

Documentation requirements and possible delays:

Claimants must submit a range of documents, including the death certificate, identity proofs, policy documents, and, if needed, medical or police records. Only complete or complete documentation can ensure processing.

For accidental or suspicious deaths, additional records like a police report, post-mortem report, or FIR may be required, adding complexity to the documentation process.

Risk of Rejection Due to Non-Disclosure or Misstatements:

Claims can be rejected if the insurer discovers any material misstatements or non-disclosures (such as pre-existing medical conditions) that were not disclosed by the policyholder when buying the policy. In such cases, the claim may be declined or reduced based on policy terms.

Impact of TDS on Policies with High Premiums:

In cases where the premium paid exceeds the prescribed percentage (10% of the sum assured for policies issued after April 1, 2012), the exemption under Section 10(10D) does not apply. This can result in TDS being deducted on payouts, and the claimant may need to manage these deductions or consult a tax advisor for further implications.

Coordination with Other Sources of Income:

While the death claim itself may be exempt, interest accrued on delayed payments is taxable and needs to be factored into the beneficiary’s total income. This may increase the tax liability, especially for high-net-worth beneficiaries who fall into higher tax brackets.

Life Insurance Claim Settlement: Practical Tips for Beneficiaries

Ensure proper nominee documentation:

Policyholders should update their nominee information, as the claim will only be disbursed to the registered nominee. The claim may be delayed if no nominee is registered, as the insurer will require a succession or legal heir certificate.

Maintain clear communication with the Insurer:

Beneficiaries should maintain open communication with the insurer, promptly respond to documentation requests, and seek clarity on any required additional documents. This can help reduce delays and streamline the claim process.

Keep a Record of Claim Settlement Receipts:

After receiving the claim, beneficiaries should retain the claim settlement receipt for future reference, especially if they need to file taxes or manage the estate of the deceased.

Seek Financial or Tax Advice for Large Claims:

For substantial claim amounts, consulting with a financial advisor or tax expert can help beneficiaries understand the tax implications of interest on delayed payments, how to invest or utilize the funds, and possible impacts on estate planning.

While Life Insurance claims offer a tax-free financial benefit to beneficiaries under certain conditions, beneficiaries should be mindful of documentation, any delayed interest’s taxability, and possible impacts if conditions for tax exemption are not met. Proper planning, nominee updates, and awareness of tax implications can ensure a smoother settlement and better financial outcomes for claimants.

6 Benefits of Life Insurance to NRIs

Here is a list of benefits offered under Life Insurance policies to NRIs.

Maturity Benefits: Endowment or money-back plans provide a sum assured (plus bonuses) at maturity, serving as a long-term savings vehicle for financial goals.
Flexibility in Payment Options: Most insurers offer flexible payment options for premiums, making it helpful for individuals without regular income streams.
Guaranteed Returns: Traditional Life Insurance policies with guaranteed returns provide a secure way to grow wealth without risk.
Continuation of Cover: NRIs can continue paying premiums and renewing their Indian Life Insurance policies even after moving abroad.
Multiple Currency Options: Some insurers offer policies where premium payments can be made in foreign currencies, eliminating the need for conversion rates or remitting money back to India.
Life Stage Planning Riders: Critical illness cover or accidental death benefit riders provide additional coverage during specific stages in one's life.

Investing in Indian Life Insurance policies while residing abroad is brilliant, as policies often come with attractive features tailored for NRIs.

Is Term Insurance Valid Outside India?

Yes, Term insurance policies issued in India are generally valid if the policyholder moves abroad or passes away outside of India. However, there are several nuances, terms, and procedural aspects to consider, especially when the policyholder is a non-resident Indian (NRI) or moves abroad after the policy is issued. Here is a detailed examination of the factors affecting the validity of Term Insurance outside India:

1. Global Validity of Term Insurance

Life Coverage Unaffected by Location

Most Indian Term Insurance policies provide global coverage, which means the policy remains valid even if the policyholder moves abroad permanently or temporarily. This is true for Indian residents, NRIs, and persons of Indian origin (PIOs) as long as they continue paying the premiums as per policy terms.

Claim Process for Deaths Abroad

If the policyholder passes away outside India, the nominee can still file a claim with the Indian insurance company. The claim process may require additional documentation, but the insurer remains bound to pay the death benefit provided all policy terms are met.

Impact of Residency Status on Term Insurance

Residency Updates for Policyholders

If a policyholder becomes an NRI after purchasing a Term Insurance policy in India, they should inform the insurer of this change in residency status. Most insurers do not restrict coverage if the policyholder becomes an NRI, but notifying the insurer is essential for ensuring a smooth claims process.

Premium Payments for NRIs

NRIs can typically continue paying premiums from a Non-Resident External (NRE) or Non-Resident Ordinary (NRO) account, and payments can be made in foreign currency if supported by the insurer. Keeping payments up-to-date is crucial for uninterrupted coverage.

Key Considerations for Claim Validity and Rejections

War or Terrorism Clauses: Some Term Insurance policies may have specific exclusions for deaths due to acts of war or terrorism, particularly if these occur outside India. If the policyholder moves to a high-risk country, it's prudent to check with the insurer to confirm whether any coverage limitations apply.

Suicide Exclusion Period: Term Insurance policies often have a suicide exclusion period, generally within the first year of the policy. If the policyholder dies by suicide within this period, the claim is typically not honored, regardless of whether it occurs in India or abroad.

Pre-existing Health Conditions and Non-Disclosure: If the policyholder failed to disclose a pre-existing medical condition or any important information (such as hazardous occupation) that could have affected policy terms, insurers may investigate and potentially reject the claim, especially for early claims within the first three years.

4. Importance of Nominee Communication and Planning

Informing the Nominee

Policyholders should ensure their nominees are aware of the policy details, the claim process, and any additional documentation that may be required if the death occurs abroad.

Ease of Contact

Insurance companies generally provide 24/7 customer support for assistance, but nominees should be prepared for potential extra steps, like embassy attestations, in case of a claim from abroad.

Consider Adding a Power of Attorney

For NRIs, if the nominee is also located outside India, having a family member or legal representative in India with a power of attorney can simplify paperwork and follow-up with the insurer.

What Happens if the Proposer Dies in Life Insurance?

If the proposer (the person who purchases and funds the policy) of a Life Insurance policy dies, the impact depends on whether the proposer was also the insured individual.

Proposer is also the Insured:

In most cases, the proposer is also the insured, meaning the person covered by the policy. If the proposer (and insured) dies, the policy’s death benefit is paid to the nominee or beneficiary.

Proposer is Different from the Insured:

If the proposer is not the insured (e.g., a parent purchasing a policy for a child or a spouse for a partner), the proposer’s death does not end the policy. Most policies include a waiver of premium rider, which waives premium payments in the event of the proposer’s death, allowing the policy to continue. The insured person remains covered, and the beneficiary will receive the death benefit if the insured passes away.

If there is no waiver of premium, a new proposer can be designated to continue premium payments and keep the policy active.

Action for Beneficiaries
Beneficiaries or policyholders should notify the insurer promptly to update the necessary details and ensure the policy remains active.

Conclusion

Life Insurance is pivotal for NRIs in comprehensively securing families' financial interests. Selecting suitable policies after informed evaluation of aspects like tenure, riders, premium flexibility, and ownership-linked tax implications is key. Streamlined overseas assistance across purchase, servicing, and claims processes by insurers also aids protection.

Frequently Asked Questions

Here are some common questions about the NRI Life Insurance claim process.

1. How long does it take to process an NRI Life Insurance claim?

According to the Insurance Regulation and Development Authority of India (IRDAI), for death claims, if an investigation is not required, the claim should be settled or rejected within 30 days of receipt of the last necessary document. If an investigation is required, it should be completed within 90 days of receipt of claim intimation and the claim should be settled within 30 days thereafter.

2. Can an NRI claim life insurance in India?

Yes, NRIs can claim life insurance in India. However, they need to ensure that they have a valid policy and all the required documents to file a claim. It is also important to note that the claim process may take longer for NRIs compared to residents of India.

3. What documents do NRIs need to file life insurance claims from abroad?

Key documents needed are death certificates, purchase proofs, claimant identity/age proofs, legal heir certificates, and medical/police reports as applicable per company guidelines.

4. How can NRIs buy life policies while residing overseas?

Online purchases, visit-time direct purchases, and authorising India-based relatives are convenient channels to buy NRI-focused life plans from abroad.

5. Do Life Insurance riders also cover disability or critical illness risks for NRI policyholders?

Yes, riders for accelerated benefits offer additional coverage for risks like disabilities, accidents, or the diagnosis of major illnesses.

6. Can documents be emailed to process NRI life policy claims?

Many insurers today offer email submission of scanned documents and online tracking of claims status for faster processing.

7. Do NRIs require medical check-ups to purchase Term Insurance plans?

Basic term plans may only need declarations beyond age thresholds, but higher covers may require medical test submissions.

8. Is the Life Insurance maturity amount taxable income for NRI policyholders?

Tax exemptions can apply to the maturity benefits of traditional plans held for over 3 years or ULIPs beyond 5 years of tenure, meeting norms.

9. How does buying Life Insurance overseas compare with health insurance?

Both serve different roles. Life Insurance enables financial aid to dependents on demise overseas. Health policies mitigate hospitalisation costs locally.

10. Are there any conditions under which the death claim might be taxable?

Yes, if the premium paid exceeds 10% of the sum assured for policies issued after April 1, 2012, tax may apply.

11. Do beneficiaries need to file tax returns for the received death claim amount?

No, as the death claim is tax-exempt, beneficiaries aren’t required to include it in their income tax returns.

12. Can NRI term policy tenure be extended after purchase?

Certain insurers allow tenure extensions on renewals to align with new responsibilities. Premium costs may differ based on attained age.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.