Importance of life insurance for NRIs

To take an illustration, Ashok is 40 year old NRI based in London working as a senior project manager in a software company. He has two children aged 5 and 9 years old, and his wife Asha is a home-maker. His parents are retired and live in Pune. They have no source of income and rely on their son Ashok for their regular expenses. Mr. Ashok can build a portfolio of insurance products that can help address his following important financial goals.

• Life cover for the financial security of his family
• Provision for his children's education
• Regular guaranteed income for parents
• Wealth creation for himself and his spouse

Life cover for the financial security of his family

Ashok has five dependents and therefore it is crucial that he is adequately covered. Pure term insurance plans are ideal for this purpose. Currently, online terms plans that are available are competitively priced and convenient to purchase. A term insurance plan will ensure that Ashok's family is financially secure and that their financial aspirations are not compromised in case of the unfortunate event of Ashok's demise.

Provision for his children's education

Provisioning and creating a corpus for children's education must ensure the following:
Wealth creation over the long term to ensure cash payouts at key educational milestones of his children
Financial security to ensure that the education of the child does not get compromised in case of an eventuality to the bread winner of the family

In case anything happens to Ashok, the investment for his children's future should continue and the children should get the benefits when required. Hence, investing in child plans designed by insurance companies will ensure that the financial plan for the child remains unhindered even in the face of an eventuality to meet cash payouts on key educational milestones. In such plans, upon the death of the parent, the family gets a lump sum amount and the life insurance company pays all future premiums on behalf of the policy holder.

Regular guaranteed income for parents

Ashok's parents need a guaranteed income to meet their day-to-day expenses. The product that addresses this goal is the Immediate Annuity plan offered by life insurance companies. Ashok can purchase an Immediate Annuity product which will then generate regular income for his parents in India. Additionally, he has the option of choosing the frequency of the payouts. Upon the death of the last surviving parent, Ashok will get the entire investment amount back which he can repatriate to his country of residence.

Wealth creation for himself and his wife

Long term wealth creation requires Ashok to systematically save and invest in avenues which provide superior long term, risk adjusted returns. As an emerging economy, India has exhibited a robust rate of growth over the recent past and has potential for sustained growth in the future as well. Given this, investing in equities in India would help augment long term wealth creation.

Unit linked plans offered by insurance companies provides an opportunity and flexibility to the customer to structure his exposure to the debt and equity markets depending on his/her financial goals and risk taking appetite. These products present an opportunity to the customer to participate in and reap economic rewards of India's growth story. The dual offering of protection and long term wealth creation makes Unit Linked products an attractive proposition for NRI's.

To conclude, life insurance offers an NRI an opportunity to plan for and meet his various long term financial objectives. As an integral component of financial planning, insurance can play a critical role in ensuring the long term financial security of the NRI, his family as well as his dependants who may be residing in India.

(Tarun Chugh is Chief Distribution Officer, ICICI Prudential Life Insurance Company Limited)

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