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Women need term insurance, add critical illness coverage: experts

One in three policies are sold to a woman in India, a recent Ecowrap report from the State Bank of India reveals. But according to PolicyBazaar, the trend seen on its platform is that women make up only about 15% of buyers of term insurance policies.

Most insurance experts agree that women are not buying term insurance – a policy that can provide adequate protection – in sufficient numbers.

The apathy of the working woman

Working women often fail to purchase adequate temporary coverage. “Most of the women who take out term insurance are single mothers or single women. Within families, the widely prevailing situation is that the male member, who is the sole breadwinner, is supposed to be insured,” says Vishakha RM, Managing Director and CEO, IndiaFirst Life Insurance.

Financial planners agree. “Many women in the formal sector depend on employer-provided group life cover. They don’t buy personal cover,” says Mrin Agarwal, founder and director of Finsafe.

According to Renu Maheshwari, registered investment adviser with the Securities and Exchange Board of India and co-founder and senior adviser of Finscholarz Wealth Managers, “Even in cases where the wife has a higher income than the husband, she sometimes has a hedge equal.”

The coverage of the policy should depend on the contribution

Whether a person needs term insurance has nothing to do with gender. “If a person is making a financial contribution, has dependents, and their absence may have a financial impact on them, they should purchase temporary coverage,” Maheshwari says.

Single women without dependents can do without (although they must buy protection against risks such as disability and illness). The amount of coverage a woman buys should be based on objective criteria. Experts use one of two approaches

One is the value of human life, where the coverage purchased is tied to a person’s earning potential over their lifetime. The second is an insurance needs analysis that takes into account current and future family expenses and goals.

In addition to the primary coverage, women should purchase a Critical Illness Rider and a Waiver of Premium Rider (which will ensure the policy continues even in the event of disability). A separate critical illness policy and disability cover can also be purchased from a general insurer (it is easier to cancel a separate policy).

Don’t look for returns

Avoid buying insurance in combination with investment plans. “You can’t buy adequate protection in such plans. The premium for Rs 1 crore coverage would be exorbitant,” says Agarwal. “Return on premium term plans should also be avoided as they are unprofitable,” adds Maheshwari.

Housewives: borders are removed

Although housewives have no tangible source of income, the tasks they perform have financial value. Therefore, they too must be insured. Insurers place limits on the amount of cover they offer them, primarily to avoid moral hazard. “If the husband has a policy, we provide the housewife with sum insured equal to 50% of the husband’s coverage,” Vishakha said.

Some insurers impose more limits. “Sometimes not only does the husband need to have a policy, but his income needs to allow for both husband and housewife coverage,” says Sajja Praveen Chowdary, term life insurance manager, PolicyBazaar.

Suppose the husband has an income of Rs 25 lakh. An insurer offers him coverage 5x his income (Rs 1.25 crore). What if he buys a Rs 1 crore policy? The wife is entitled to 50% of the husband’s cover, i.e. Rs 50 lakh. Together, their cover becomes Rs 1.5 crore, while the husband is only entitled to Rs 1.25 crore. The woman can only get coverage of Rs 25 lakh. “Majority of term insurance policies have a starting sum insured of Rs 50 lakh,” says Chowdary.

Recently, Max Life Insurance has launched a housewife policy in which if the household income exceeds Rs 5 lakh, she can purchase cover for Rs 50 lakh, no questions asked. Thus, its purchase does not depend on whether the husband has a policy or on his sum insured. More insurers could launch such plans to make coverage easier for housewives.