Providers of the family often relentlessly shoulder the bulk of responsibilities that may even outlive them.
This is a good reason for term life insurance to be considered not only a prudent but also a non-negotiable investment for them. Simply put, when something as crucial as the family’s future is at stake, the safety net should ideally be cast as wide as possible. However, until recently, limited options were available to effectively cater to the insurance needs of these breadwinners’ non-earning but working partners at home — the homemakers.
Typically, protection products existed for this segment earlier as well in the form of joint life cover but they came with their share of conditions.
The coverage in these traditional plans did not do complete justice to the monumental value added by a homemaker through household work, childcare and more. Not to mention the dependence on the earning spouse meant that they could not independently opt for the plan. Last year, the Supreme Court’s landmark judgment also noted that the notion of homemakers not adding any economic value is problematic and must be overcome.
The insurance market evolves as per consumer needs and societal progression, and thus, the recent introduction of independent term homemaker policies by multiple insurers marked a milestone in this evolution. Here’s a deep dive into how these plans work and how they differ from the joint life cover policies.
Ensuring better coverage
Independent term plans have widened the scope of coverage for homemakers. In these plans, the sum assured of ₹50 lakh is exclusively available for homemakers, thereby ensuring sufficient coverage for their dependents. Not just this, one can also opt for additional riders such as accidental death benefit rider to ensure extra protection in these plans. Now, if we compare the coverage with joint life cover policies, the sum assured couldn’t suffice to adequately insure both spouses. The homemakers could get coverage of only 50% of the total sum assured in joint life policies.
Further, the income multiplier would be applicable as per the earning husband’s yearly income. Let’s say the husband’s annual income is ₹5 lakh and the multiplier applicable is 15 times the annual income. In this case, the policyholder’s eligibility would be for a coverage of ₹75 lakh. Now, if he takes a cover of ₹50 lakh, the homemaker is left with ₹25 lakh coverage. Keeping the policies in the market as the benchmark, the coverage usually starts from ₹50 lakh cover as anything less than that is not enough to shield the dependents. Assuming further, if the husband ends up using the whole of ₹75 lakh cover, the homemaker would not be eligible for any coverage as per the rules. The protection is much more robust and dependable in independent homemaker term plans.
Flexible criteria
In joint life cover, the homemaker’s eligibility was entirely dependent on the husband’s income and his policy. To facilitate greater expansion, the eligibility criteria have been eased in independent term plans for homemakers. The plans can be purchased by buyers within the age bracket of 18-50 years. The conditions have been kept simple to make the plan more accessible and inclusive. Firstly, the policyholder should have an annual household income of ₹5 lakh, and secondly, she should be a graduate.
However, some policies just need a 10th or 12th pass qualification for aspirants to purchase the plan. These criteria have been simplified for non-earning women to easily opt for the plan and make sure their dependents are covered even in their absence.
No dependency
Unfortunately, dependency is a term that has long been associated with homemakers. However, when it comes to financial decisions, even earning women have been known to depend on the men of the family.
Homemakers have been an untapped segment for the insurance industry, and now, these plans aim to empower women consumers by completely eliminating this dependency.
The policyholder no longer needs to depend on the husband’s decision to buy the policy or on the income that he earns.
While the contribution made by the homemakers often doesn’t get its due recognition, the fact is that their absence can severely impact the emotional as well as the financial infrastructure of a family.
With the introduction of these plans, the industry officially acknowledges the fact that term insurance is as necessary for homemakers as it is for breadwinners.
(The author is Head - Term Insurance, Policybazaar.com)
