What NRIs Need to Know Before Purchasing Health Insurance in India

Vinod was feeling perplexed. He is an NRI based out of UAE, but wanted to purchase a health insurance policy in India, and since at some point in time wanted to return to India. However, he was not sure if he will be covered for any expenses in India, or if he can pay through foreign currency etc. In short, he was not sure whether he should buy a health insurance in UAE or in India.

Vinod is not alone. Migration to foreign countries in search of better opportunities is now commonplace. However, while purchasing a financial product like health insurance in India, its implications from point of view of policy features, legal and tax provisions must be taken into account to make the right decision.

So, let's discuss a few pointers that NRIs planning to buy insurance policies in India must note before making the leap.

1. Read the fine print for geographical coverage

If you spare some time and read the policy terms and conditions of almost all of the insurance policies in India, there is a clause on geographical restrictions, which says that the policy will only cover expenses for treatment in India. Hence, treatment out of India is not covered under the policy. So, for our friend Vinod who lives in UAE and undergoes a surgery/hospitalisation there, the health insurance policy in India will not cover it.

However, a few insurers have started covering treatments outside India, although these are for select illnesses only. For e.g. Religare Care provides a “Care Anywhere” benefit that covers treatment of select illnesses only like cancer, brain tumour, organ transplant etc.

2. Underwriting restrictions for persons resident out of India

Being a business of managing risk, insurers have well defined underwriting guidelines and have to follow the same while evaluating any new proposal. People who are resident outside India are perceived as more risky as compared to people who reside in India, especially due to the fact that it is very difficult to corroborate facts in case of a claim and ascertain the genuineness of the same when the person resides outside India.

Hence, most of the health insurance companies in India decline such cases. For those who do cover such profiles, there is generally a cap on the sum assured and stricter norms regarding getting medical tests done in India etc.

# 3: FEMA regulations

If you are an NRI, you need to also be mindful of the provisions of Foreign Exchange Management Act (FEMA) governing insurance policies. Regulation #3 of Foreign Exchange Management (Insurance) Rules, 2000 prescribes that a person resident in India may purchase or continue to hold policy purchased from an insurer outside India when he was a resident outside India. However, on the issue of purchase of policies from insurers in India, the claim payout can be repatriated out of India to the extent of the premium paid in foreign currency.

#4: Tax benefits under Indian income tax law

Section 80D of the Income Tax Act deals with tax deduction on health insurance premium. It may be noted that an NRI can also claim in the same way as a resident, when it comes to tax deduction u/s 80D. Apart from the Rs. 25,000 deduction for a policy for yourself, spouse and dependent children. You can also get a separate limit of Rs. 25,000 (Rs. 50,000 for senior citizen parents) towards your parents health insurance if you are paying for it. A claim under Section 80D can decrease your overall tax liability if you have taxable income in India.

Health insurance strategies for an NRI

Below are some pointers that an NRI can reflect on and proceed, to get the best out of his health insurance expense:

• If your time to return to India is more than 3-4 years away:

You do not need to purchase a policy in India at this moment. Purchase and maintain your insurance cover in your country of residence.

• If your time to return to India is less than 3-4 years away:

In addition to a comprehensive insurance cover abroad, you may (not must!) consider buying an insurance cover in India, if you happen to visit India on a vacation and find the terms of insurance policy decent enough. The benefit of this is that once you return to India, you’ll not have to rush for purchasing a health insurance policy. Also, during the 3-4 years that go by, most of the pre-existing condition and specific illness related exclusions will be over and you will be able to claim fully under the policy without those restrictions.

• If you are moving abroad & already have a health insurance policy in India:

In such a case, if you are moving abroad for a short & uncertain time for 1-2 years with a clear plan to move back to India, it makes sense to continue the Indian health insurance policy, in addition to buying a fresh policy in your country of residence for the stay period. However, if you are going for a very long term and are reasonably certain about that, then it does not make sense to continue your policy in India, as the geographical restrictions on the policy will not let it be of much use to you & prove an unnecessary drain on your finances.

Must Read: Questions you have been asking about Tax Deduction on Health Insurance

Coverfox Verdict

NRIs have a great deal of affinity towards things closer home and insurance is no exception. However, one should properly time the insurance purchases in India and read the policy wordings very closely for geographical and other restrictions. As for our friend Vinod, he now has a good deal of clarity on how he should go ahead with purchasing health insurance in India.