As much as you plan your life ahead, uncertainties are a constant. In the event of an unfortunate situation, you will always want to stay 1-step ahead. Term insurance plans become effective under such circumstances as they serve as a financial replacement in your absence.
While typically marketed for family breadwinners, term insurance is crucial for homemakers too since their Human Life Value (HLV) takes into consideration their contribution towards holding the family steady, aiding in child support (educationally, mentally, and physically), and more.
However, since this is a term insurance plan for an unemployed individual, the parameters to choose a term plan differ greatly. Let’s take a look -
Best Term Insurers for Housewives and Plan Details
| INSURERS | RIDERS | SUM ASSURED | ELIGIBILITY |
|---|---|---|---|
| Max Life | NA | Upto ₹50 lakhs |
|
| ICICI Prudential | Critical Illness (up to a maximum of ₹50 lakhs) | ₹50 lakhs |
|
| HDFC Life | NA |
₹50 lakhs OR 50% of the husband's income OR ₹1 crore (in the case of Return of Premium plans) (whichever of the above 3 is lower in the case of standard term plans) |
|
Why are Term Insurance Plans for Housewives Different?
Do term insurance plans cater only to those actively employed? How do housewives fit into this equation?
The distinction arises when selecting term insurance plans for housewives. Without an "official" employment listing, when a housewife applies for a term insurance policy, the underwriting team assesses her spouse's income as an eligibility criterion.
Say,
- Roshni, a 25-year-old homemaker, applies for a term insurance plan.
- The underwriting team realises the applicant is a housewife and hence seeks out the financial details of her spouse.
- They look into the income details of her spouse and calculate the term insurance cover that he is eligible for (let’s say ₹3 crore).
- Now, provided Roshni’s spouse has an existing term insurance plan, she can get a plan for 50% of his coverage, i.e., ₹1.5 crore.
(However, please remember that most term insurance providers have a fixed cap of up to ₹50 lakhs for housewives. So, in this example, Roshni will be eligible for a ₹50 lakh cover amount.)
Thus, in the case of housewives, the term insurance cover eligibility largely depends on the income proof and eligibility of the earning spouse. So, when applying for a term insurance policy as a housewife, stay prepared with documents like - income proof of the husband, address/ ID/ Age proofs for both husband and wife, etc.
How do Term Insurance policies for Housewives work?
I. Qualifications
Much like in the case of a standard term insurance policy, a term plan for housewives has a few eligibility criteria in place that you need to consider -
- Health: Term insurance underwriters consider the medical history of the applicant (in this case, the housewife). When applying for a term plan, be ready to disclose any history of surgeries, hospitalizations, or lifestyle ailments such as blood pressure, diabetes, asthma, thyroid, cholesterol, etc. Expect a potential increase in your premium based on this information
- Income: When calculating term insurance coverage, insurers often use the multiplier approach. In this, insurers take into account your age -
| AGE | MULTIPLIER |
|---|---|
| 18 - 35 | 25 |
| 36 - 40 | 20 |
| 41 - 45 | 15 |
| 46 - 50 | 12 |
| 51 - 55 | 10 |
| 56 - 65 | 5 |
(*Availing term insurance plans beyond this age is normally not recommended.)
So, for example, if Rati, a 35-year-old is looking for a term insurance plan with an annual income of ₹10 lakhs, then the maximum coverage that she can gain is ₹2.5 crore (age bracket supports a 25 multiplier, so 25 * ₹10 lakhs).
However, as previously explained, in the case of housewives, since they don’t have any particular source of income, it’s their spouse’s income that comes into play when calculating the cover.
- Education: Term insurance providers generally believe that the higher an applicant's educational qualification, the greater their income potential and, consequently, their ability to make premium payments.
In the case of standard-term insurance policies for both salaried and non-salaried applicants, insurers extend plans to individuals with a minimum qualification of Class 10th and above. However, for housewives, the minimum educational qualification required is a graduate degree.
- Lifestyle and habits: Term insurance underwriters scrutinise the lifestyle, habits and hobbies of the applicant to analyse the risk factor. To give an example,
| Use Cases | Risha is a 25-year-old Smoker, seeking ₹2 crore coverage till she turns 60. | Avni is a 25-year-old Non-smoker, seeking ₹2 crore coverage till she turns 60. | Premium Difference |
|---|---|---|---|
| HDFC LIFE | ₹33,889 | ₹16,945 | ₹16,944 |
| ICICI PRUDENTIAL | ₹26,111 | ₹15,360 | ₹10,751 |
| MAX LIFE | ₹22,532 | ₹14,082 | ₹8,450 |
You can see similar differences in premiums if you hold riskier habits or hobbies like skydiving, etc since these activities present your insurer with higher risks of payout in the event of permanent disability/ untimely deaths.
- Profession: Again, in the case of housewives, since they are largely linked to household chores, the insurance underwriting team looks into the occupational designation of the spouse to determine if they should extend a policy at all.
For example, if an applicant is involved in the army, or is working in a hazardous factory, the chances that they/their spouses will get the benefit of a term insurance policy is pretty slim.
II. General Eligibility Factor
Housewives can only avail of term insurance policies if their husbands hold a term insurance plan with the same or a different insurer. The coverage for the housewives, under such circumstances, is largely determined by the husband’s eligible cover amount.
In general, insurers go for either of these options -
- 50% of the husband’s cover (up to ₹50 lakhs),
- A maximum of up to ₹50 lakhs, or
- ₹1 crore (in the case of Return of Premium plans)
III. Cover Calculation Considerations
When calculating the cover amount of the term insurance plan, we recommend that you look into the following factors -
- Dependents (include your children specifically)
- Your existing financial liabilities
- The inflation rate
- The educational expenses of your children
- Any future life stage requirements for your family.
(You can also bank on our free term insurance cover calculator, or reach out to our expert advisors to help you with the calculation is get a niche result.)
What are the best riders for Term Insurance Plans for Housewives?
Opting for a well-researched vanilla term insurance policy can be an excellent financial choice, but we recommend enhancing its value by selecting riders that unlock the full potential of the policy. For housewives, unfortunately, not many riders are available. The only one offered by a few insurers is -
Critical Illness Rider - Consider adding this excellent rider to your plain-term insurance policy. It's affordable and provides the benefit of a lump sum or staggered amount payout if you are diagnosed with any of the listed critical illnesses. Moreover, the received amount can be utilized at your discretion, whether for treatments, savings, or any other requirement.
Why should Housewives opt for a Term Insurance Plan?
- Financial protection
In our view, this isn't even a question. Why deny housewives the opportunity to enhance their family's financial security in the event of their passing simply because they aren't earning members? Despite being unemployed, they are a critical factor in providing the necessary emotional and physical support that ensures the steady and uninterrupted earnings of other family members.
2. Tax benefits
With a term insurance policy in place, housewives, and therefore their spouses (who pay the premium) can enjoy the tax benefits under Section 80C of the Income Tax Act.
3. Child-centric support
Given that a housewife is typically more attentive to a child's educational and other life-stage needs, a term insurance plan can offer specific assistance in the event of her unfortunate demise. The cover amount can be utilized to cover expenses related to a child's higher education, marriage, and other life stages.
4. Debt repayment
The cover amount from the term insurance plans for housewives can be used to repay any debt that the spouse/family has. This action helps prevent financial strain on the surviving family members and ensures smooth financial planning for the future.
5. Estate planning
The term cover received after the death of a housewife can be used to purchase a house/plot that would secure the future of the children and the spouse. This would act as a legacy that has been left behind by a mother/wife.
Conclusion
Term insurance plans for housewives constitute a pristine financial protection tool with great utility, provided you understand the hows and the whys. We recommend acknowledging that despite being unemployed, homemakers significantly contribute to the financial stability of a family. Therefore, a financial replacement for them in their absence serves as a catalyst for an improved life for the surviving family members.