Is death benefit paid to NRI nominees taxable?

—Name withheld on request

Policy taken in India will settle claims in Indian Rupees only. So, to avail the claim, the nominee must have an Indian bank account. As long as the nominee can meet these criteria, the claims process is the same for residents and NRIs. The death claim benefit is tax-free in India, even in the hands of an NRI nominee.

I am 24 years old student. I have purchased a health insurance policy from an insurance aggregator and have to pay six installments in a year. I have paid one installment so far. However, I feel that I no longer need this policy as I have other health insurance policies. Can I stop the balance payment? Will it affect my credit score? If so, is there any other way I can cancel my policy without hurting my credit score?

— Devanshu Gupta

Insurance policies have a free-look period clause in which you can cancel your policy if it does not meet your requirements.

The standard free look period is 15 days. In some cases, it can extend up to 30 days. The latter is applicable in case of policies purchased electronically or through remote mode.

You will receive a 100% refund of the premium amount paid, subject to deduction for expenses incurred on medical underwriting by the insurer and proportionate risk premium for the days the policy is in force.

If you do not cancel your policy, and stop paying the installments, it will affect your credit score. Most health plans have a built-in installment mode of payment.

For individual policies, I recommend opting for the installment facility offered by the policy, rather than opting for the Pay Later option, which is similar to taking a personal loan to buy health insurance.

Abhishek Bondia is the Principal Officer and Managing Director of SecureNow.in.