Yes, an NRI should review term insurance after moving abroad: the policy stays in force, but your cover needs, the insurer's records and your tax position change. The easy one to miss is the US side, where a 1% excise tax applies to each premium paid to an Indian insurer once you're a US resident.
What happens to your Indian term policy when you move abroad
Your term insurance policy doesn't end when you leave India. It stays in force for as long as the premiums keep arriving, and a move abroad doesn't, by itself, end the contract.
If you're weighing a fresh plan instead, the rules for buying NRI term insurance are different from the rules for keeping the one you have. Keeping it well comes down to three things.
Tell the insurer where you now live
Update your address, country of residence, phone and email through the insurer's service process, and ask for a written acknowledgement. Then read the exclusions clause, because some policies carve out deaths in high-risk or sanctioned countries.
Records that match matter most at claim time. A nominee claiming for a death abroad usually needs the foreign death certificate apostilled or attested by the Indian mission, with a translation if it isn't in English.
The three-year rule protects a policy you already hold
Under Section 45 of the Insurance Act, 1938, an insurer can't question a life policy on any ground once three years have passed from issue or revival. Inside those three years, it can refuse a claim only for fraud or for a material fact that was misstated or hidden.
A policy you've held for years is already past that window. A replacement policy starts the clock again, which matters for the decision further down.
Keep premiums flowing from an NRI account
Premiums stay payable in rupees. Once you're an NRI, your resident savings account has to be redesignated, so a mandate set up on it may simply stop.
Move the standing instruction to an NRE or NRO account before the next renewal date. Lapse is the one failure a nominee can't fix after the fact.
Is your NRI term insurance cover still enough abroad?
The sum assured was set for a life in India, and your family's costs are now in dollars, dirhams or pounds. Adequate life cover is measured against what your dependants would need where they live, not against the number printed on the schedule.
Worked example: Arjun's cover after the move
- Cover bought in 2019: ₹1 crore, sized at about ten years of his family's Indian household spending.
- After moving to Texas in 2024: $80,000 a year of spending and a $400,000 mortgage.
- Ten years of spending plus the loan: $1.2 million.
- What ₹1 crore is worth in dollars: a little over $100,000.
The policy still works. It now covers roughly a tenth of what his family would need.
Keep the Indian policy and add local cover for the gap
I'd keep an Indian policy that's in force and past its three-year window, then buy local term cover for the gap. The old policy was priced at a younger age and can't be contested, and a replacement would give up both.
Don't surrender the Indian policy until the new one is actually issued. Group life cover from a US employer doesn't close the gap reliably either, because it usually ends with the job.
The US tax side of keeping an Indian term policy
Once you're a US resident, through a green card or the substantial presence test, your Indian policy picks up obligations it never had in India. Which ones apply depends on whether the policy has a cash value.
A 1% excise tax on every premium
The US charges 1 cent per dollar of premium paid to a foreign insurer on a policy covering the life of a US citizen or resident, under IRC Section 4371. The payer reports it on Form 720 each quarter, with returns due 30 April, 31 July, 31 October and 31 January.
The tax doesn't depend on cash value, so a pure term premium owes it too. The US India treaty can exempt these premiums only when the insurer holds a closing agreement with the IRS, and Indian insurers generally don't, so I'd plan on paying it.
The Form 720 filing steps for a term premium are the same as for LIC or a ULIP.
FBAR and Form 8938 turn on cash value
My position is simple: a policy with no cash value isn't a financial account, so pure term cover stays off the FBAR and Form 8938. A return-of-premium term plan pays money back, so I treat it as a cash value policy for both.
| Policy type | FBAR | Form 8938 | Form 720 |
|---|---|---|---|
| Pure term, no cash value | No | No | Yes, 1% of each premium |
| Return-of-premium term | Yes, at surrender value | Yes, at surrender value | Yes, 1% of each premium |
| Endowment, money-back or other plan with a surrender value | Yes, at surrender value | Yes, at surrender value | Yes, 1% of each premium |
The FBAR applies once all your foreign accounts together pass $10,000 at any point in the year, and Form 8938 has its own higher thresholds. A cash value plan also faces a separate US income test under IRC Section 7702, the same question that decides how US rules treat ULIPs.
Who needs this review, and who doesn't
The insurer and cover checks apply to anyone who moved abroad with an Indian policy in force. The US checks apply more narrowly:
- US citizens, green card holders and anyone resident under the substantial presence test need the Form 720 and FBAR checks.
- NRIs in the Gulf, the UK or Singapore don't face the US excise tax, though their new country may have its own rules on foreign policies.
- A policy on your spouse's life is outside the excise tax if your spouse isn't a US citizen or resident, even when you pay.
- A policy on your life is inside it even when a parent in India pays the premium.
- If you move back to India and stop being a US resident, later premiums fall outside it. A US citizen stays inside it wherever they live.
How to run the review in your first three months abroad
- Find the policy schedule and note the type: pure term, return-of-premium, or a plan with a surrender value.
- Write to the insurer with your new address, country and contact details, and keep the acknowledgement.
- Read the exclusions clause for any country-specific carve-outs.
- Move the premium mandate to an NRE or NRO account and confirm the nominee's contact and bank details.
- Recalculate cover against your new costs, and buy local term cover for the gap before touching the old policy.
- If you're a US resident, file Form 720 for each quarter you pay a premium, and add any cash value policy to your FBAR and Form 8938.
Get professional help if you've already paid premiums as a US resident without filing Form 720. The tax itself can't be waived, but late-filing penalties can be argued down for reasonable cause, and how that first late filing is presented matters.
Start with the policy schedule
Pull out your policy schedule this week and check whether it shows a surrender value, because that one line decides which US forms apply. I'd finish the insurer letter and the cover review before the next premium falls due, so any Form 720 is on time.
If you'd like help with the cover number and the US filings together, InvestMates can run the review with you.
Frequently asked questions
Is my life insurance still valid if I move abroad?
Yes, an Indian life insurance policy stays valid after you move abroad, as long as premiums are paid and the policy doesn't exclude your new country. Update your residence with the insurer in writing, so the records match if your nominee ever claims.
What is the 3 year rule for term insurance?
The 3 year rule for term insurance is Section 45 of the Insurance Act, 1938: three years after issue or revival, the insurer can't question the policy on any ground. Before that, it can refuse a claim only for fraud or a misstated material fact.
Do I need to report an Indian term insurance policy on my FBAR?
No, a pure Indian term insurance policy with no cash value doesn't go on your FBAR, because the FBAR covers insurance policies that have a cash value. A return-of-premium plan or a policy with a surrender value does, at that value, once your FBAR threshold is crossed.
Is a death benefit from an Indian term policy taxable for a nominee in the US?
No, a death benefit from an Indian term policy isn't US income for a nominee living in the US, because IRC Section 101(a) excludes life insurance death proceeds from gross income. Proceeds on the life of a non-resident alien also aren't US situs assets for US estate tax on non-citizens, under IRC Section 2105(a).