Spoke to a US insurance advisor last week, and here’s what we learnt
- 1 day ago
- 3 min read
Our discussion was largely centred on US life insurance for NRIs and returning NRIs. Sharing my learnings below for US folks who are seeking an estate planning solution -
Why should I even care about US life insurance if I'm moving back to India, and what does it actually solve for?
Because of estate tax. The day you become a non-resident alien (NRA) to the US, your estate tax exemption on US-situs assets collapses from around $15M (2026) to $60k. Anything above this limit faces up to 40% federal estate tax. US stocks/ETFs, US retirement accounts and real estate all US-situs assets are included.
Here’s where life insurance comes in, as US life insurance proceeds are excluded from the NRA estate calculation under IRC §2105(a); that means the death benefits are free of US estate taxes. It also passes to heirs free of US federal income tax and can be used to pay off those estate taxes applicable to other US assets. On permanent insurance policies, cash value grows tax-deferred and can be pulled out tax-free via loans and withdrawals.
When is the best window to buy?
If your move is 2+ years out, you're underwritten as a US resident with the widest range of options and no net worth floor. However, once your planned move is within 2 years, underwriters look at the case similar to a non-resident, which typically brings a global net worth requirement (usually around $2M for a carrier like Prudential) and narrows your options. Insurance companies will also look at where in the world you're moving to, as not all destination countries are equally insurable.
So ideally you buy a US insurance policy when you're still in the "thinking about returning" phase, not when you have flights booked. It’s also worth noting that underwriting itself may take 4 to 6 weeks, so leaving it to the last month before your move adds unnecessary stress.
Term or permanent policy, and how much?
For most US folks, term insurance is the right starting point. It's the cheapest way to cover your dependents and the estate tax exposure, and good policies can be converted to permanent later if your situation changes. Permanent makes sense specifically for people who want the tax-deferred cash value wrapper.
One question worth answering before you buy: is this purely for estate planning, or also for income replacement and long-term care of your dependents? Estate-planning-only coverage tracks your US-situs exposure. Everything else usually needs a bigger number. Being clear on the job the policy is doing saves time with the advisor.
What if I’ve already moved back to India?
This is where you need to separate two different questions: will a US insurer underwrite you, and can you legally pay for it?
On underwriting, yes, a US insurer will still look at you as an NRA as long as you have a living US financial connection (assets, accounts, or income). But FEMA doesn't care what the insurer is willing to do. Once you're a resident of India, you cannot use Indian funds to buy insurance outside India. That restriction also covers FEMA 6(4) funds, meaning corpus you built in the US while you were still an NRI. Those funds can't be used to buy a fresh policy either; they can only be used to pay premiums on a policy you already hold.
So in practice, once you've moved back and become a resident, a new US life insurance purchase isn't really on the table, whatever the underwriting side says. If you already bought before moving, you're fine; keep paying premiums from your US corpus. If you didn't buy before moving, an Indian insurer becomes your only real option for new coverage.
