Term Insurance For Housewife
Introduction
Term Insurance plans are usually made available for people with a regular income stream. But housewives do not have a regular income stream and it may be challenging for them to apply for a regular term plan. This is why insurance companies have created a separate provision for such homemakers.
Term insurance for housewives is a specialized product that allows one to buy a term plan without a regular income stream, by applying as a housewife. These plans are usually subject to slightly higher requirements and the coverage may depend on the husband’s financial situation.
Nonetheless, term plans for housewives can be an excellent protection product for women who invest a lot of time and effort in caring for their families. The family can use the proceeds from the term plan to invest in the child’s future as they cope with the passing away of a close family member.
Why should you consider buying a term plan as a housewife?
Housewives (or homemakers) play a vital role in supporting a family. They take care of kids, support the elderly and take part in most household chores. All this unpaid labor can add up to tens of thousands of rupees if you quantify this work. However, most families don’t think much of this unpaid labour. It is only in the absence of a homemaker, that you really notice the void.
And if you were to hire outside help to make up for the absence of the homemaker, then you would have to compensate them and spend significant sums of money in the process.
Here is a simple illustrated example
Rajesh is a salaried employee in the IT sector with an annual income of 15 Lakhs per annum. Sunita is married to Rajesh and is a housewife tending to their three children and Sunita’s ageing mother who lives with the family. Rajesh already has a term insurance plan to cover any potential financial issues arising from his absence. However, Sunita’s absence from the family would also leave a similar gaping hole.
To care for his aged inlaws and three children, he may have to quit work for a while until he can hire, train, and trust outside help. This could leave the family with no income. He may even have to spend large sums of money to employ outside help for an extended period. This is why it makes sense to buy a term plan for Sunita too. As a housewife, her role is as important (if not more) in keeping the family afloat. And in her death, the family will need large sums of money to fill the gap.
Note: Most insurance companies cover non-working spouses irrespective of their gender. So in the example noted above, Rajesh could have been the homemaker and Sunita could have been the working member of the family. And Rajesh would also have been entitled to a term insurance plan despite having no real income. Since this article specifically is targeted for housewives, we have included women in this example.
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Benefits of buying a term insurance plan for housewives
Additional income support in the absence of a caretaker:
As we already noted, housewives deal with a lot of unpaid labor that generally goes unnoticed. However, if you quantify this expense you will see all this can easily cost an individual ₹40,000 a month. In their absence, the burden of paying for these expenses falls squarely on the primary breadwinner. So it makes sense to buy a term plan to supplement your income.
Here is a table illustrating expenses associated with domestic help
| Type of Domestic Help | Estimated Monthly Expense |
|---|---|
| Cook | ₹10,000 - ₹15,000 |
| Caretaker (for the elderly) | ₹12,000 - ₹18,000 |
| Nanny (for children) | ₹15,000 - ₹20,000 |
Securing your child’s future:
While a working husband can still provide for children’s expenses, the absence of a spouse and their support can have detrimental consequences for all parties involved. The death of a close family member can force the primary breadwinner to reevaluate their career prospects. And the impact of all this disruption can be particularly cumbersome for the children.
This is when a large corpus (from a term insurance plan) can come in handy. Even if a family’s income streams were disrupted for extended periods, the money can be used to secure your children’s future
Here is a table illustrating typical costs associated with schools, tuition, books, and uniforms for three children aged 3, 7 and 15. As you can see some of these expenses can be formidable if a working husband were to take a short break after the passing of their wife.
| Age of Child | Education Level | Estimated Annual Expense |
|---|---|---|
| 3 | Preschool | ₹20,000 - ₹50,000 |
| 7 | Primary School | ₹30,000 - ₹70,000 |
| 15 | Secondary/High School | ₹50,000 - ₹1,50,000 |
Income support if you were diagnosed with a critical illness:
Term plans for housewives may also extend critical illness benefits. And if your health insurance plans do not fully pay for your expenses or rehabilitation and care afterwards, then a critical illness benefit can pay a lump sum to the family that you can use at your discretion. This can be used to support any medical expense you incur in the process.
Note: however that there are very few term plans that offer critical illness benefits at the moment.
How term insurance plans for housewives are different?
Term insurance providers extend term plans after assessing your income. This detail is important because it determines the total coverage available for prospective customers. Without this detail, insurers will not be able to gauge your total financial potential. Insurers may then extend a large cover that may not be in line with your total income potential. In other words, they may overinsure you.
If you were overinsured, then you may have a perverse incentive to lead a risky lifestyle with the knowledge that the term insurance payouts could enrich your dependents significantly. In other words, the payout after death could be worth more than all the income you could ever earn if you were alive. That doesn’t automatically mean you will be reckless. But there is a real risk. This is why insurers only extend a cover after taking into account your income.
But housewives have no real income and insurers have no way of directly calculating restrictions on the total coverage available. This is why term insurance for housewives is distinctly different from regular term plans. They are sold despite homemakers not having real income and as a consequence they come with a bunch of other restrictions.
Here is a table illustrating the key differences between regular term plans and term plans for housewives:
| Regular Term Plan | Term Plan for Housewives |
|---|---|
| Coverage is decided based on the income of the policyholder | Coverage is decided based on spousal income and limited by an upper-cap |
| No restrictions on buying riders | Riders may not be available with most term plans |
| Does not require your spouse to have a term plan | May require your spouse to have a term plan |
| Standard underwriting based on individual health and lifestyle | Additional scrutiny on household dynamics and total family income |
Things to Consider Before Buying a Term Insurance for Housewife
Maximum Coverage Limit:
Term insurance policies for housewives usually come with strict coverage limits. They may depend on your husband’s total income and could also be capped at a level no greater than 1 Cr. So it makes sense to consider a term plan that imposes limited restrictions on this front.
Educational Qualification:
Different insurance providers may have different requirements regarding educational qualifications. For instance, most policies may require a minimum of 12th pass and even others may ask you to hold a graduate degree to increase your total coverage.
Age Limits:
There are strict age limits that housewives are expected to adhere to before applying for a policy. The lower threshold is set at 18 years since it is only legal to marry above the age of 18. The upper threshold can vary between 50 and 60. So if age restrictions are a concern, it’s best to consult with an advisor before you buy a term plan.
Rider Availability:
While term plans for housewives may accompany basic add-ons like accidental death benefits, they are usually not very comprehensive when it comes to other riders like critical illness benefits etc. So if you are looking for specific add-ons you may have to pick a plan that specifically addresses your needs.
Requirement of Husband’s Existing Insurance:
Some insurers require that the husband already has a term insurance plan, and the cover for the housewife may be decided as a percentage of the husband’s coverage. Ideally, you want to pick a term insurance plan extends a term.
Best Term Insurance Plans for Housewives
When you are picking the best term plan for housewives, you want to pick an insurer with credibility, good settlement numbers and operational scale. Beyond this, you also want a provider that imposes few restrictions on coverage, extends add-ons, and imposes lower education requirements.
Based on these factors, here are the best term plans for housewives, 2024, based on the recommendations of Ditto’s advisors.
| Best Term Plans | Age Eligibility | Educational Requirement | Coverage Based On | Max Coverage Limit | Riders | Spouse’s Existing Plan Required |
|---|---|---|---|---|---|---|
| Max Life Smart Secure Plus | 18 to 50 years | 12th pass/Graduate | Husband’s income | Up to ₹1 Crore | Accidental Death Benefit | No |
| HDFC Life Click 2 Protect Super | 18 to 60 years | Graduate and above | Husband’s income | Up to ₹1 Crore | No Riders Available | No |
| ICICI Prudential iProtect Smart | 18 to 60 years | Graduate and above | Husband’s income | Up to ₹1 Crore or 50% of husband’s coverage, whichever is lower | Critical Illness Rider up to ₹15 Lakhs | Yes |
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Conclusion
As we already noted, term insurance for housewives can be an excellent option for women who invest significant time and labour in caring for their families. It can help the family deal with their absence without major financial disruptions. The only caveat with these term plans is that they come with restrictions. It is important to be aware of these restrictions and also mindful of buying a term plan that imposes fewer requirements from both the housewife and her husband. Make sure you before selecting a plan that best suits your needs.
