Personal Finance

Do NRIs need health insurance in India?

Deepesh Raghaw | | Updated on: Mar 13, 2021
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Useful under some situations when visiting home

Pratik is 48 years old and has been working in the Middle East for over 15 years. He stays there with his wife and two kids. He wants to retire in India.

He has saved enough to provide for all his goals. Until now, he has invested only in the NRE (non-resident external) bank fixed deposits. He and his wife have purchased a house in India and have accumulated physical gold gradually. Pratik has no exposure to equities yet.

Over the past 12-18 months, the interest rates on NRE FDs have been going down. He worries that his money is not productively invested. With the sudden run-up in equity markets, he wants to invest in equity, too but is unsure on how to approach it.

He has sufficient life cover. His employer covers him for medical expenses in the Middle East. Should he purchase a health insurance plan in India too?

Health insurance

Buying health insurance in India seems like an additional cost. However, there could be two situations where buying health insurance in India can be useful.

One, something might happen to a family member during their visit to India, the treatment of which requires hospitalisation.

Two, a family member may want to get a medical procedure done in India instead of in the Middle East.

Also, right now, he and his wife are fit and can easily buy health insurance. However, as they get older, they might contract an illness which can make it difficult or prohibitively expensive to purchase health insurance. It’s better to buy a health cover when you are fit.

Therefore, it is important that he buy a health insurance plan in India. He can go for a small cover of say about ₹10 lakh.

Equity investments

In investments, Pratik has never gone beyond NRE fixed deposits. While his discomfort with low interest rates is understandable, he must take the recent stock market returns with a pinch of salt. Markets do not always give good returns, they can underperform too.

Hence, while he targets 10-12 per cent return on his equity investments, he must be prepared for minus 10 per cent return too, at least in the short term. During good times, investors tend to underappreciate the risks associated with equity investments.

However, given his comfortable financial position, there is a case for taking on risk with a portion of his portfolio.

Since Pratik has never invested in the equity market, he may not be too sure of his risk appetite. So, he must increase his equity exposure gradually.

There are two ways to do this. Since he has a large sum in NRE fixed deposits, he can route his incremental savings into equity.

Or, he can set short-term targets for equity allocation. For instance, if the target for equity allocation in the long-term portfolio is 40 per cent, he can consider increasing his allocation by 5 per cent every year.

He must understand there is no right or wrong way. He might as well move to 40 per cent equity allocation straight away. For his equity exposure, he can consider a couple of large cap index funds and an international equity index fund.

The writer is founder of PersonalFinancePlan

Published on March 13, 2021

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