Should You Buy Term Insurance for Your Stay-at-Home Spouse?

Why Is It Crucial to Protect a Stay-at-Home Partner With Term Insurance?

Let us bust some common myths and explore the reasons why it is important to buy term insurance coverage for homemakers in India.

Cost of Replacing Invisible Contribution

It is the common misconception in India that only the breadwinner of the family requires term insurance coverage to replace their earnings in case of uncertainties. Insurance is not just about replacing the income; it is also about replacing the value a person brings in terms of unpaid services and family stability. Unpaid services like a homemaker’s contribution to the family are often overlooked until the family faces a tragedy.

Stay-at-home partners make a significant contribution to activities such as domestic tasks ( cooking, cleaning, childcare), community services, and care work. A study conducted in Punjab has revealed that the economic value of a homemaker is equivalent to approximately INR 14,000 per month ( INR 1,68,000 annually). State Bank of India’s 2023 report also mentions that unpaid work is estimated to contribute 7.5% ( INR 22.7 lakh crore) of GDP to the Indian economy.

Let us take an example to understand the cost of replacing the invisible contribution of the homemaker with monetary support. Let us take the case of Meera. While coping with the grief, Arun had to hire help. Such as:

Domestic help: INR 5,000 to INR 7,000 monthly

Cook: INR 7,000 to INR 10,000 monthly

Child care: INR 3,000 to INR 5,000 monthly

Full-time maid: INR 15,000 to INR 25,000 monthly

That translates to approximately INR 30,000 to INR 47,000 per month. Easily, INR 3,50,000 to INR 4,50,000 per year, depending on location. A good term insurance policy can cover these costs for several years, ensuring family stability.

Ensures Smooth Life Transitions

The passing away of a stay-at-home partner can have a huge emotional impact on the surviving partner, disrupting their daily life and work life. The emotional and financial impact of losing the homemaker makes it harder for the family in life transitions. Having term insurance cushion eases the transition process with financial support in hiring the required help on time.

Financial Obligations Do Not Go Away

Even if the homemaker was not making any visible income contribution to the family, they are the co-borrower in many loans, such as car loans and home loans. In case of the untimely demise of the stay-at-home partner, the surviving partner or the earning partner has to pay out the remaining debt obligations. Hence, there is no option of taking a career break or looking for flexible career arrangements to look after the kids or ailing parents. However, having a term insurance coverage for the stay-at-home partner can give you the needed financial support to explore such flexible options.

How Does Term Insurance Work for Homemakers?

In India, the insurance companies offer term insurance cover for stay-at-home partners. The following are the important things to keep in mind while buying term insurance cover for a non-earning spouse:

Coverage

The insurance companies offer a separate cover/individual policy for the non-earning spouse. The coverage that may usually vary from INR 25 lakhs to INR 1 Cr. is decided based on the earning spouse’s income. There is no income proof needed for a certain coverage limit, which may vary from insurance company to insurance company.

Also, a stay-at-home partner can buy a joint cover with the earning partner. However, the coverage would often be limited to 50 to 60% of the earning spouse’s cover. For example, if the earning spouse’s coverage is INR 1 Cr, the non-earning spouse can get a cover up to INR 50 lakhs.

Premium

The term insurance premium for a non-working partner is subsequently lower, especially when they are young and healthy. Coverage of INR 1 Cr may come for an INR 650 to INR 1,000 premium.

Customisation

The term insurance coverage offered to homemakers is customisable. Along with the base coverage, one can opt for accidental death cover, critical illness cover, which can provide additional protection. In case of diagnosis of critical illness, the additional coverage availed can be used for treatment without having to deplete the savings made for retirement or children’s education.

At Jio Insurance Broking, you can compare term insurance policies offered for homemakers by various insurance companies. You can compare the benefits, features, riders and cost on a side-by-side basis to make an informed choice.

Conclusion

To conclude, a stay-at-home partner may not bring a tangible salary home, but their role is crucial and irreplaceable. Losing them comes with significant financial cost, making it harder for families in times of transition. Having term insurance coverage gives much-needed financial support during the grieving period.

The coverage can be used for hiring house help, a cook, and child care. It can also be used for debt repayment, financial support for children and more. However, it is important to avail the right cover by taking into consideration of annual replacement cost, and outstanding obligations.