Mistake 1: Not Updating Nominee Details
One of the most common errors when buying life insurance is not updating the nominee details. Most of the life insureds forget to update the nominee details on major life changes such as marriage, childbirth, or changes in the family structure after buying a policy.
Failing to update nominee details defeats the very purpose of buying life insurance. The primary purpose of a life insurance policy is to provide financial security to your loved ones when you’re no longer there to support them. Missing or outdated nominee information can lead to rejections or delays of the claims during unfortunate events. This might leave your family vulnerable and facing a financial strain in.
How to avoid?
It is necessary for the NRIs to review and update the nominee details at regular intervals. Also, ensure that the nominees are aware of the existence of the policy and its claim process to secure hassle-free claim settlements.
Mistake 2: Avoiding Medicals
Many NRIs might want to avoid medical examination when buying a life insurance policy. However, avoiding medical check-ups is a significant mistake which every policyholder should avoid.
Medical underwriting helps insurance companies assess your health status accurately and offer the most appropriate plan and premium rates.
How to avoid?
It is necessary for NRIs to undergo medical examination at the time of buying the insurance to ensure fair premium rates adequate coverage.
Mistake 3: Choosing the Wrong Plan
Choosing the wrong life insurance plan is another common mistake among policyholders that can undermine their financial goals. It stems from inadequate research, not comparing the available plans, not assessing your insurance needs or making decisions based solely on premium costs.
Life insurance p come in various types—term insurance plans, whole life plans, endowment plans, money-back each designed to meet different needs.
How to avoid?
One should first assess their insurance needs, considering various factors such as age, number of dependents, income, family obligations and long-term financial goals and then opt for an insurance plan which best suits their needs. Additionally, the sum assured in the plan should also be aligned with the amount that you need to support your family, pay off the outstanding debts and cover future financial expenses like education costs, etc. Choosing a plan solely based on recommendations or low premiums without understanding its benefits leads to inadequate coverage or poor returns.
Mistake 4: Ignoring Tax Benefits
According to the Income Tax Act, 1961, under Section 80C, life insurance policies are liable to tax deductions up to ₹1.5 lakh annually on premiums paid for the insurance policy. Additionally, the death benefit is tax-free and the maturity proceeds received from the insurance policy are also tax-free under Section 10(10D),. Many policyholders are either not aware of these tax benefits or fail to factor them into their financial strategies.
How to avoid?
Non-Resident Indians (NRIs) often overlook these tax benefits under the Income Tax Act 1961 available on life insurance policies purchased in India, as they assume that these benefits apply only to residents. However, this is not true. NRIs are also eligible for tax deductions under the Income Tax Act, 1961. Being informed and availing the tax advantages of insurance not only helps in saving money but also makes the policy more cost-effective in the long run.
Mistake 5: Forgetting to Disclose Overseas Address
A common mistake amongst NRIs while buying a life insurance is forgetting to disclose their residency status or overseas address. Many NRIs, while buying a life insurance policy or after moving overseas, continue using their Indian address, either out of oversight or convenience, without realising its serious implications.
Insurance companies in India have different risk assessment processes NRIs, and non-disclosure of the overseas address can lead to policy cancellations or claim rejections later.
How to avoid?
Accurate and updated disclosure of current and residenc, as well as employment, is crucial, as it affects premium calculations and underwriting decisions. Ensure to provide correct and updated personal information, including address, to avoid such complications. Transparency ensures smoother policy servicing and claim settlement.
Conclusion
Buying life insurance is a fundamental step in securing the family’s financial future, especially for Oman NRIs. When buying life insurance, it's crucial to avoid common mistakes that may jeopardise the coverage of the insurance plan or leave your family financially vulnerable. Being informed and proactive about the common mistakes while buying can make a significant difference in choosing the right coverage and enjoying a smooth claim process.
FAQs
Can NRIs buy life insurance in India?
Yes, NRIs can buy life insurance from Indian insurers, subject to underwriting guidelines and documentation requirements.
Can I update or disclose my overseas address after purchasing an insurance policy?
Yes, you can provide your overseas address after buying the policy. However, it's strongly recommended to disclose your overseas address and NRI status at the time of application to ensure transparency and smooth claim settlements.
Is it compulsory for NRI to be present in India while buying a life insurance policy?
No, NRIs are not required to be physically present in India while buying a life insurance policy. They can buy the policy online, which is available on the digital platforms of life insurance companies.
