At the time of purchasing insurance, there is always a dilemma whether to purchase it in India or outside, in view of implications from point of view of policy features, legal and tax provisions and these must be taken into account to make the right decision. If you are an NRI and planning to return back to India, there may be one question on your mind: should I purchase health insurance in India? However, buying health insurance for NRIs is not an easy task, given the underwriting norms followed by insurance companies and lack of features which cover overseas treatment.
In this article, I’ll examine this and some other questions on this topic and present a few pointers that you as a returning NRIs should keep in mind, while planning to buy health insurance in India.
#1: Steep underwriting norms make it difficult
This is the biggest pain area: Indian insurers have different underwriting guidelines for NRI profiles. Given that they’re outside India, they’re perceived to riskier than the resident counterparts especially due to the fact that it is very difficult to corroborate facts & ascertain genuineness in case of a claim when the person resides outside India. Due to this, many reputed insurers like Apollo do not offer policies to NRI (this is to the best of my knowledge). For those who do, there are some or the other restriction like that on the sum assured e.g. you can’t purchase a policy having more than Rs. 10 lacs cover and so on. So, you might have ended up selecting the best policy without any sub limits and capping and so on, but then when you apply for it, the insurer can reject the application because you’re an NRI, and I guess that’s not a very fun situation to be in! Situation is different for life or a personal accident policy is comparatively easy for NRI though.
#2: Check the fine print on the geographical coverage
Life, personal accident and critical illness policies which are fixed payout based policies cover you globally. However, the problem with indemnity based policies like mediclaim policies is that they mostly contain a clause on geographical restrictions which says that the policy will only cover expenses for treatment in India. Hence, any treatment taken outside India is not covered under such policies, which defeats the whole intention of an NRI buying the policy in India. Recently, one can find innovative products like Bajaj Health Care Supreme or Religare Care which promise global coverage but you’ll do well to read the fine print: the global coverage comes with good amount of restrictions & applicable for select illnesses only and thus mainly aimed at resident families going outside India for some critical surgeries and all. Hence, even such features are not of much use for returning NRI population.
#3: Keep in mind the FEMA regulations on insurance
You need to be aware of the provisions of Foreign Exchange Management Act (FEMA) as those will apply to your insurance purchases in India or even outside India. Regulation 3 of Foreign Exchange Management (Insurance) Rules, 2000 prescribe that a person resident in India may purchase/continue to hold policy purchased from an insurer outside India when he was a resident outside India. However, if the premium was paid out of rupee funds, the same needs to be repatriated back to India within 7 days of receipt. Also, for policies purchased from India, the claim payout can be repatriated out of India only to the extent of the premium that was paid in foreign currency. Hence, returning NRIs have to be careful in which currency they’re planning to make the premium payment, in view of the abovementioned repatriability issues.
#4: As regards tax deduction, NRI are on same footing as resident (but….)
Section 80D of the Income Tax Act deals with tax deduction on health insurance and critical illness insurance policies. It may be noted that a NRI and even foreign citizens can also claim in the same way as a resident, when it comes to this tax deduction. But note that the deduction is available only on the policies approved by IRDA (which is the Indian regulatory body for insurers). This means that there is no deduction under the Income Tax Act for overseas policies. For Section 80D, apart from the Rs. 25,000 deduction for policy for yourself, you can also get a separate limit of Rs. 25,000 if you have parents and are paying for their health insurance. Even if you’re not buying yourself a policy in India, it’s likely that your parents are covered under health insurance in India. In such case, a good tax planning strategy is that if you have a taxable income in India, you pay premium for their policy & claim a deduction in your tax return.
Thoughts on what should be a Returning NRI’s strategy on health insurance piece
First, you need to decide the time frame when you want to return back to India. Below are some of my thoughts on how a returning NRI can go about his health insurance piece:
If you’re not sure on when (and whether) you’ll R2I:
Don’t bother to even think of buying a policy in India. Search a good insurance provider in your host country. If needed, take help of a CFP professional in your city.
If you’re planning to R2I in the next 3-4 years:
You can consider purchasing a health insurance in India, however this is not mandatory. The only benefit of this is that once you return to India, you’ll not have to rush for purchasing a health insurance policy and more importantly, the waiting periods for pre-existing condition and specific illness will be over & you’ll get a full coverage under the policy. Before you take the leap, note that there are newly introduced Day 1 coverage plans also slowly getting available in India (e.g. Religare), so this advantage also can thin out by the time you R2I and find a lot of such products.
If you’ve already R2Ied:
Purchase a health cover in India, irrespective of whether your employer offers it or not. It does not matter if you are an overseas citizen of India (OCI). Till the time you’re in India and offer an Indian address, getting a policy is not that difficult. Coming to a situation of a moving abroad resident, if you already have an insurance policy in India and are moving abroad for a very short duration (say 1-2 years) with a clear plan to move back to India, continue the Indian health insurance policy, in addition to buying a fresh policy for health insurance in your country of residence for the stay period. If you’re going to stay for a very long period there and not sure on whether you’ll return or not, better to chuck the Indian policy, save on the premium & use that for the policy purchased in your host country.