Term Insurance for NRIs: India vs US, Decided Properly

Most NRIs carry the wrong amount of life cover in the wrong currency. The employer plan in New Jersey pays out in dollars to a spouse who may move back to Pune; the LIC policy a parent bought years ago pays out in rupees to a family whose mortgage is in dollars. Neither was chosen; both were inherited from circumstance. The question this guide answers is the one an NRI should actually ask: how much cover does a family living across two countries need, in which currency does each part of that need sit, and which insurer, Indian or American, should write each part.

The answer is less obvious than the sales pages on either side suggest, and it turns on three things most of them omit: a US excise tax on premiums paid to foreign insurers, an Indian rule that decides which currency a claim is paid in, and a September 2025 change that quietly deleted the "GST waiver" every NRI insurance page still advertises.

Start with the need, not the product

A term policy is a promise to replace what you would have provided. For an NRI household that promise is split across borders in a way a domestic calculator never captures. There is income to replace in dollars for a spouse and children in the United States. There is a monthly transfer to parents in India that stops the day you do. There may be a home loan on a flat in Chennai and a mortgage in Texas. Each is a real obligation, and each is denominated in the currency it will be paid in.

That is why the calculator below asks for the rupee items separately. The output is one cover figure, shown in both currencies, with the rupee share called out, because that share is the strongest argument for holding part of the cover in India rather than all of it in the US. A death benefit that arrives in the currency of the obligation does not depend on an exchange rate on the worst week of a family's life.

§ Term cover calculator · two currencies

Estimate, not advice

How the number is built. Income replacement is the present value of your annual income over the years you choose, discounted at a 2 percent real rate, which is a conventional way of saying the money is invested conservatively and grows a little faster than inflation. Family support in India is treated the same way in rupees and converted at the rate you enter. Debts are added at face value, since they are paid off in a lump sum. Education is a lump sum you choose. Existing cover and liquid savings earmarked for dependants come off the top. Retirement accounts are deliberately excluded: a 401(k) drawn early by a grieving spouse is taxed and penalised, and should not be counted as cover. The result is an estimate to take to an agent, not advice, and it will be wrong in the specific ways your family is specific.

What India lets an NRI buy, and how the claim is paid

Non-resident Indians and OCI cardholders can buy term cover from Indian insurers; LIC's own NRI page sets out the documents, which run to passport, visa or residence permit, overseas address proof, income evidence, and for US residents a FATCA declaration. Most large insurers now underwrite NRIs through a video medical examination, with physical tests at empanelled centres abroad or in India above certain sums assured; the limits differ by insurer and change often enough that they are worth confirming directly rather than reading from a comparison site.

The rule that matters more than any of this is the one governing the money. The RBI's Master Direction on insurance allows an NRI to pay premiums from funds held abroad, from NRE or FCNR(B) accounts, or from an NRO account, and then ties the currency of the claim to the currency of the premiums: a payout in foreign currency is permitted only in the proportion in which premiums were paid in foreign currency. Pay every premium from your NRE account or by remittance from the US and the whole death benefit can be paid abroad or credited to an NRE account, which keeps it freely repatriable. Pay from NRO and the claim is a rupee claim that leaves India through the USD 1 million window, with a chartered accountant's certificate, at the worst possible time to be assembling paperwork. For a family that will need the money in dollars, the premium account is a decision, not a convenience.

On tax, India is straightforward. The death benefit from a term policy is exempt in the beneficiary's hands under Section 10(10D) of the Income-tax Act, the premium being far below the 10 percent of sum assured that would disqualify it. Premiums qualify for the Section 80C deduction, which an NRI can use only under the old tax regime and only against Indian income, so for most it is worth nothing.

The GST waiver is gone, because the GST is gone

Every NRI term insurance page written before autumn 2025 leads with the same hook: pay from your NRE account and the insurer refunds the 18 percent GST on the premium. That was real, and it is now irrelevant. At its September 2025 meeting the GST Council exempted all individual life and health insurance policies from GST, effective 22 September 2025, as the government's own announcement records. The exemption applies to residents and non-residents alike; the NRE-account condition that used to unlock the refund no longer buys anything. Group policies, including employer term cover, still carry GST, which is one more reason an individual policy compares better than a group one than it did a year ago.

If an insurer or aggregator is still selling you the waiver, it is a sign of how often these pages are updated.

What the United States does with a foreign policy

This is the half the Indian sales pages cannot write and the US ones do not know to.

The death benefit is not income. The IRS position is the same for a policy issued in Mumbai as for one issued in Hartford: proceeds received because of the insured's death are not includible in gross income, as the IRS confirms; only interest paid on a delayed settlement is taxable. A US beneficiary of an Indian term policy reports nothing on the payout itself.

The premiums carry a federal excise tax. Under Section 4371 of the Internal Revenue Code, premiums paid to a foreign insurer for a life insurance policy are taxed at one cent on each dollar, and the person liable is the one who pays the premium: you. It is reported on Form 720, the quarterly federal excise tax return, which almost no individual has ever filed. The amount is small, 1 percent of the premium, perhaps $20 a year on a typical policy, but the obligation is real and the form is unfamiliar. There is an exemption: the India–US treaty is on the IRS list of treaties that can relieve this tax, but only where the specific insurer has entered into a closing agreement with the IRS, and the payer must know that agreement is in force before relying on it. Ask the insurer, in writing, whether it holds one. If the answer is no or silence, budget the 1 percent and file the form.

A pure term policy is not a reportable account. FBAR and Form 8938 reach foreign insurance policies that have a cash surrender value; the IRS's FBAR guidance treats a policy with cash value as a financial account. A term policy has none, so an Indian term plan does not go on either form, and the premiums leaving your NRE account are already inside an account you report. Return-of-premium variants, endowments and ULIPs are a different matter entirely: they carry cash value, they are reportable, and the investment-linked ones can bring the PFIC regime that makes Indian mutual funds so expensive for US persons. If you buy in India as a US resident, buy plain term and nothing else.

Estate tax rarely bites, but know the rule. Proceeds of a policy you own are part of your US taxable estate. With the federal exemption in the millions this is academic for most NRI households, and a US citizen or green-card holder's estate is computed on worldwide assets in any case, so an Indian policy changes nothing about which side of the line you fall on. Where cover is large and the estate is close to the threshold, a US adviser will raise ownership structures; that is a conversation for them, not for a guide.

Price, underwriting and the question of trust

Indian term premiums for a healthy non-smoker in their thirties are low by international standards, and for the same rupee cover a US policy will often cost more in dollar terms; the reverse is sometimes true at the largest sums assured, where US insurers compete hardest. Neither side is reliably cheaper across the board, and a quote on your own age, health and amount is the only number that means anything. What you can reason about without a quote is the shape of the decision.

Buy in India for the rupee part of the need: parents' support, an Indian home loan, a family that would stay in or return to India. Pay from NRE so the claim is repatriable, keep the policy plain term, and accept the 1 percent excise tax and Form 720 as the cost of a foreign policy. Buy in the US for the dollar part: income replacement for a family that will stay, the mortgage, education. The US policy carries no excise tax, no FEMA question about where the claim can go, and a claims process your spouse can run in their own time zone.

Two cautions on the Indian side. Claim settlement is where an NRI policy is tested, and the family making the claim will be dealing with an Indian insurer from abroad, with documents to apostille and a bank account to prove. Choose the insurer on claim-settlement record and on how it handles overseas claims, not on premium alone. And disclose everything: residence, travel, health, other policies. An insurer that discovers a misstatement has a reason to contest exactly when your family can least afford it.

The sequence

Run the calculator above and note the rupee share of the need. That split is your allocation between the two markets.
For the dollar portion, get a US quote on that amount. The quote request under the calculator goes to a licensed agent; nothing is bound until you decide.
For the rupee portion, shortlist Indian insurers on NRI claim record, confirm the video-medical limits for your sum assured, and ask in writing whether the insurer holds an IRS closing agreement under Section 4371.
Pay Indian premiums only from NRE or by remittance from abroad, and keep the bank records; they decide the currency of the claim.
Note the Form 720 obligation for the Indian policy. Tell your US tax preparer the policy exists; they will not ask.
Tell your spouse where both policies are, which account pays each, and whom to call. A policy nobody can find is a premium paid for nothing.

Frequently asked questions

Can an NRI living in the US buy term insurance from an Indian insurer?

Yes. NRIs and OCI cardholders are eligible, and most large insurers underwrite overseas applicants through a video medical examination, with physical tests at empanelled centres above certain sums assured. Expect to provide your passport, visa or green card, overseas address proof, income evidence and, as a US resident, a FATCA declaration. Limits and documents vary by insurer and change often; confirm them directly before relying on a comparison page.

Does India still refund GST on term premiums paid from an NRE account?

No, because there is no longer any GST to refund. The GST Council exempted all individual life and health insurance policies from GST with effect from 22 September 2025. The NRE-account condition that used to earn NRIs an 18 percent refund no longer matters. Pages still advertising a "GST waiver for NRIs" are out of date. Group policies, including employer cover, remain taxable.

Is the payout from an Indian term policy taxable in the US?

No. Proceeds received because of the insured's death are not includible in gross income under US law, whether the insurer is Indian or American; only interest on a delayed settlement is taxable. India also exempts the payout under Section 10(10D). The US obligation sits on the other end of the policy: a 1 percent federal excise tax on each premium paid to a foreign insurer, reported on Form 720, unless the insurer holds an IRS closing agreement under the India–US treaty.

Do I report an Indian term policy on the FBAR or Form 8938?

Not a pure term policy. Both forms reach foreign insurance policies with a cash surrender value, and a term policy has none. Return-of-premium plans, endowments and ULIPs do have cash value and are reportable, and the investment-linked ones can fall under the PFIC rules. As a US resident buying in India, keep to plain term.

Will my family receive the claim in dollars?

Only to the extent the premiums were paid in foreign currency. Under the RBI's insurance Master Direction, a payout in foreign currency is permitted in the proportion in which premiums were paid in foreign currency, and non-resident beneficiaries may have it credited to an NRE or FCNR(B) account. Pay every premium from NRE or by remittance from abroad and the whole claim is repatriable; pay from NRO and it is a rupee claim that must leave India through the USD 1 million window with a chartered accountant's certificate.

Term Insurance for NRIs: Buy It in India, in the US, or Both?