Term insurance is a safety net for the financial stability of a family in the event of the breadwinner’s early demise. As roles and responsibilities shift, working women are increasingly playing the part of breadwinners. Even though they don’t earn, homemakers, too, bring substantial value to their households through their contributions. Yet, a striking disparity remains in the matter of insurance coverage for women, as is evident from the fact that they account for a meagre 15 per cent of term policy buyers on a platform like PolicyBazaar.
Term cover a must
Working women play a key role in their family’s finances, either as primary or co-breadwinner. “If something unfortunate happens to an earning member, the family loses the crucial income which would have gone towards paying off debts, meeting the cost of children’s higher education, or towards the upkeep of elderly parents,” says Rhishabh Garg, head of term insurance at Policybazaar.com.
The payout from a term plan can serve as a financial buffer. “Ideally, working women should have a cover of 10 times their annual income—the same as working men,” says Kapil Mehta, co-founder and chief executive officer (CEO) of SecureNow.
There are an estimated 160 million homemakers in India. While they don’t bring in money, they make a considerable contribution by managing the household and looking after family members. Their efforts, if replaced by paid services, would carry a substantial monetary value. “In the homemaker’s absence, the surviving family members will need enough life insurance to cover child care, household bills, and other miscellaneous costs,” says Samit Upadhyay, president and chief financial officer (CFO), Tata AIA Life Insurance.
“If the housewife has any outstanding debts or liabilities in her name like a personal loan or credit card debt, term insurance can help cover them without impacting the family’s finances,” says Amit Jaiswal, chief–BALIC Direct at Bajaj Allianz Life.
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Term insurance for working women is a straightforward proposition. But when it comes to homemakers, insurers are reluctant to issue them term covers, primarily due to the risk of potential moral hazard. “A large term plan for a housewife can result in a conflict of interest as the family gains if the homemaker dies. That is an issue, particularly where the amounts involved are large,” says Mehta.
Garg, however, says: “Nowadays enough checks are in place to identify fraud or misdeeds. Homemakers can opt for term insurance regardless of whether their husband has this policy. The eligibility criteria have become more flexible.”
Homemakers are offered a term cover on the basis of their household income. A homemaker between the age of 18 and 50, who’s a graduate, or even one who has passed 10th or 12th, and has a minimum household income of Rs 5 lakh, could be offered a term cover of up to Rs 1 crore.
When choosing the tenure, consider when you will be able to meet your financial responsibilities: children’s education and marriage, home loan repayment, etc. By the time the tenure ends, your spouse and you should also have an adequate retirement corpus.
Mehta recommends selecting an insurer with a claim settlement ratio of over 95 per cent. Jaiswal adds that the insurer must also have a strong solvency ratio.
Compare premiums from different insurers before purchase. According to data from PolicyBazaar, women’s policies can be 9 to 28 per cent cheaper than those for men. Jaiswal, too, emphasises that working women should make the most of the discounts available to them.
Naval Goel, founder and CEO, PolicyX.com, suggests buying appropriate riders to maximise the benefits from the term cover.
Buy term insurance early to lock in lower premiums. As you age, the premium amount increases. Moreover, if you develop any health issues, obtaining coverage becomes more difficult.
Finally, carefully review the policy wording. Pay close attention to the terms, conditions, and any exclusions mentioned to ensure you have a clear understanding of the coverage provided.