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Module: General Practice

Q16: Scenario: A Resident Individual wants to use the LRS route to purchase a life insurance policy from a foreign insurer. The policy is issued by an insurer in the UK. Is this permitted?

A
No, payment for life insurance premiums to foreign insurers is explicitly prohibited under Schedule I.
B
Yes, but only if the resident is physically present in the UK at the time of purchase.
C
No, this is a Capital Account transaction not permitted by RBI.
D
Yes, a resident individual can remit capital for purchasing a life insurance policy from a foreign insurer under LRS, provided the aggregate limit is respected.
✅ Correct Answer: A
The "Life Insurance" Restriction: Under Schedule I (Prohibited Transactions), Item 8 specifically lists: "Remittance for payment of premium for life insurance policies obtained from insurers outside India." Exceptions exist (e.g., if you are a returning Indian who bought the policy while abroad, you can continue it), but a Resident Individual cannot use LRS to buy a new life insurance policy from a foreign insurer while in India.
This is a common confusion because "Health Insurance" (travel insurance) is allowed, but "Life Insurance" (which is viewed as an asset/investment) is prohibited/restricted.
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