Life insurance is essential in securing financial stability, especially for NRIs (Non-Resident Indians) who must protect their families in India. One of the main factors in life insurance is determining the sum assured, which is the amount your nominees will receive in the event of your untimely demise.
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However, as life circumstances change, it’s essential to reassess and increase your sum assured to meet evolving financial needs.
Term Plans
The sum assured is the fixed amount of money that the life insurance company agrees to pay the nominee in the event of the policyholder's death during the policy term. For NRIs, the sum assured is critical in ensuring their families back home in India have adequate financial security.
The sum assured acts as a safety net, allowing the policyholder's dependents to cover daily expenses, education costs, or repay liabilities such as home loans or debts. However, as financial responsibilities grow, this amount might need to be revised upwards.
Example:
If an NRI purchases ₹1 crore term insurance and the policyholder passes away within the policy period, the insurance company will pay ₹1 crore to the nominee(s). This sum helps cover expenses and liabilities, ensuring the family's financial stability.
Note: You may also like to read about term insurance.
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Here’s a guide to help NRIs understand when they should consider increasing their life insurance sum assured:
As NRIs go through different stages of life, their financial obligations often increase. Major life events like getting married, having children, or buying a home are times when you should reassess your life insurance coverage. Each of these milestones typically brings additional financial responsibilities, and increasing the sum assured ensures that your family’s future remains secure in your absence.
Benefits:
Marriage: If you’ve recently married, your spouse will likely depend on your income, necessitating higher coverage.
Children: Raising children comes with educational and general upbringing expenses, which can be significant.
New home purchase: If you've taken a home loan, your sum assured should cover outstanding liabilities.
As NRIs grow in their careers or businesses, their income may increase significantly. With this growth, it’s important to consider upgrading your sum assured to match your enhanced lifestyle and higher financial commitments. You might have more assets, a larger family to support, or a higher standard of living that needs protection.
Benefits:
Income rise: An increase in income can translate into greater financial responsibilities.
Investment growth: If your assets have grown substantially, ensure your insurance covers these.
Many NRIs take loans to invest in properties or other ventures. Increasing your life insurance sum assured becomes critical if you have taken on additional debt, such as a mortgage or business loan. The goal is to ensure your family won't struggle to repay these liabilities in your absence.
Benefits:
Mortgage: If your property investments involve loans, ensure coverage is enough to pay off the remaining debt.
Business loans: NRIs running businesses should consider their business debts when calculating their life insurance coverage.
Relocation often means adjusting to new living costs, higher expenses, and different healthcare needs. Move to a country where the cost of living is significantly higher than in India. You should consider increasing your life insurance coverage to match the new financial environment.
Benefits:
Higher living costs: Ensure your family can maintain their lifestyle in a high-cost environment in case of unforeseen events.
Healthcare costs: Healthcare expenses abroad can be substantially higher, so your insurance needs to reflect these potential costs.
Many NRIs focus on estate planning to ensure their assets are passed down to their heirs without complications. Suppose you want to leave behind a substantial legacy or have specific estate planning goals. In that case, increasing the sum assured effectively ensures that your family receives financial security and other assets or properties.
Benefits:
Wealth transfer: A higher sum assured can help smoothen the wealth transfer process.
Estate taxes: Some countries have taxes that can reduce the amount passed on to your heirs so that higher coverage may be needed.
Inflation is another critical factor to consider. Over time, the purchasing power of money decreases due to inflation, meaning the sum assured you choose today may not be sufficient for your family’s future needs. Increasing your life insurance coverage protects your family’s lifestyle against inflation and rising costs.
Benefits:
Combat inflation: Ensure your sum assured is periodically adjusted to account for inflation.
Health issues or the deteriorating health of family members can also be a trigger for increasing your sum assured. Medical expenses can be overwhelming, especially if treatment is required abroad. If there’s a possibility that your family will face large medical bills, it’s wise to increase your sum assured to cover potential costs.
Benefits:
Medical emergencies: Family health issues may lead to higher financial demands, and a larger sum assured can offer peace of mind.
For NRIs, increasing the sum assured on life insurance is not a one-time decision but an evolving one. As your financial responsibilities, family circumstances, and lifestyle change, you must periodically review and adjust your life insurance coverage to protect your loved ones. Always reassess your life insurance needs with every major life event, increase in income, or rise in liabilities to ensure your family is well-protected, no matter what life throws your way. Doing so will ensure that the legacy you've worked hard to build is preserved and your loved ones remain financially secure.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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