The simple “housewife” is actually the powerhouse of any family and her absence creates a vacuum that can rarely be filled by anyone else. Although the emotional scars can never be erased, a term insurance plan, for the housewife, now helps the family to at least ward off any possible financial challenges caused by the homemaker’s absence.
Although homemakers do not directly bring in revenue to the household, they contribute by doing tasks that are important for the smooth functioning of the house. Ergo, homemakers can be equated to the operations managers of the corporate world who run the kernel of the organization. In fact, more recently, there have been serious debates to assign an economic value to the work done by homemakers and add the same to the country’s Gross Domestic Product (GDP). Would you not pay a cook, a nanny or an estate manager to manage the household in the absence of the “housewife”?
The above points clearly advocate the necessity of providing term plans for housewives. But can a housewife buy a term insurance plan?
Basics of a Term Life Insurance Plan
Traditional thinkers went by thinking of life insurance as a mechanism to provide financial protection to the dependants in case of the demise of the sole breadwinner of the family. In return for this financial protection, called “Sum Assured”, the insurance company would receive “Premiums” for the defined policy term.
The amount under “Sum Assured” depended on the age and annual income of the insured and was pegged at approximately 10-15 times the annual income. The underlying logic of this thumb rule was simple: If the income-earner dies, his income*15 times should be sufficient for the children to become financially independent or for the wife to find alternative sources of income.
Also, in the interim, the corpus of Sum Assured will earn interest thus adding to the kitty and giving more time to sustain life.
In the case of homemakers, there was no clear human life value because they did not “earn” a specific income. Their death did not cause any loss of income. This logic kept housewives outside the purview of term life insurance.
Although, you could still buy life insurance policies in the name of your homemaker spouse.
iSelect Star Term Plan - Term Insurance for Housewives
One of the conditions that you will face often while insuring your homemaker spouse is that you need to have term insurance from the same insurer. Other term policies, like iSelect Star Term Plan from Canara HSBC Oriental Bank of Commerce Life Insurance, allow you to include your spouse in the same plan.
Here are the salient features of the iSelect Star term plan, and how joint life cover helps:
1. Joint life cover with the spouse:
Spouse can also be covered in the same policy at an additional discounted rate
2. Increasing Sum Assured
as per life stages so that the premium amounts increase gradually and remain affordable at all times
3. Return of premiums
You can get all your premiums back if both of you survive the policy term. What else can be more gratifying than getting protection for several years and also receiving all the money that you invested
4. Limited Premium Paying Term:
Pay for a defined term and get covered for life. This feature is a real value for money because you may pay only for 5/10/15/20/25 years and get your whole life covered.
5. The policy works on a typical “economies of scale” model and thus you get discounts on premiums for higher Sum Assured
6. Additional riders
are offered to cover accidental deaths, total permanent disability and financial support for children. These benefits are in addition to the core offerings and Sum Assured of the policy.
The disability benefits help cover incidental expenses incurred that may not be covered by the regular Mediclaim policies whereas the Accidental Death rider gives an add-on Sum Assured to provide more financial cushion to the family. Child Care Benefits help the child pursue their aspirations even after the untimely demise of the parents.
How Human Life Value (HLV) helps you in Determining Term Insurance Cover?
Modern schools of thought have redefined the way new-age insurers look at the contributions of homemakers. As mentioned at the beginning of this article, would you not pay a cook, a nanny or house help to manage the household in the absence of the “housewife”? This is exactly the annual expense that you would incur in case of the untimely and unfortunate demise of the backbone of the family.
|House help***||Rs. 15,000|
*Average salary in Delhi basis figures available on Indeed.com**Average salary in Delhi basis figures available on PayScale/Glassdoor** Driving the kids to school/coaching, if applicable etc***For chores including sweeping/mopping/washing utensils
The table gives an estimate of your spouse’s economic contribution to the household although the actual contribution is priceless because no-cook or nanny can ever replace the emotional strength that a homemaker provides to the family. However, this quantification is necessary for calculating the Human Life Value (HLV) which forms the basis of extending term insurance covers to the homemakers.
The total monthly expense will range from Rs 30,000 to Rs 60,000 depending on the services and this works out to an annual expense of Rs 3.6 lakhs to Rs 7.2 lakhs. If your spouse is about 35 years of age, you must extrapolate the annual expense, using the same thumb rule that was used for income earners, factoring in the inflation as well. Some components of the expenses, such as Nanny, Driver may not exist in future though.
Even with a modest Rs 3.6 lakh expense per year, the thumb rule of 10 times when applied, the projected corpus works out to Rs 36 Lakhs. This is the minimum insurance cover that the housewife should have basis the financial calculations. The exact amount will vary basis age and other personal circumstances of the family.
The term “housewife” has now evolved to be called “homemaker” to make it more gender-inclusive as more and people of the other genders also opt to stay at home to manage the household chores and run errands for the family when needed. Of course, this trend is very recent and the sheer magnitude of stay-at-home women is still staggeringly high. Adding them under the umbrella of term insurance will surely add to the family’s financial stability.