Pursuit of financial security is a common aspiration for all, irrespective of gender. Securing one’s present and the future of dear ones is the core foundation of financial planning. Yet, the traditional conditioning of women led to their non-participation in this crucial decision. This dynamic also explains the reason behind them being left out of the financial protection net, or entirely relying on their spouse’s decision of term insurance ownership. Regardless of their employment status, women’s invaluable contribution is crucial to a household, and so should be their decision-making power in financial planning.
Fortunately, the Indian insurance industry has made significant strides in the past few years to make term insurance more accessible and affordable for women. What also incredibly works in their favour is that women have far lower mortality and morbidity rate than men, and hence are entitled to a lower premium for the same coverage as compared to men. It, hence, hardly comes as a wonder that new-age solutions are constantly being designed to cater to both homemakers and working women’s needs effectively.
Here’s deep diving into what makes term insurance a more financially prudent decision for women and how it opens up the way to financial independence for them.
Mortality, morbidity
Mortality rate and morbidity rate have a direct impact on term insurance premium and this is why the policy is up to 30% cheaper for women. But what are these rates and how are they relevant to term insurance? Mortality rate is a measure of the number of deaths in a population size, while morbidity rate is a measure of illness or injury in a population size in a timeframe.
Statistically, women have a distinct advantage when it comes to longevity. Numerous studies and data points consistently affirm that women tend to outlive their male counterparts.
This difference in life expectancy can be attributed to various factors, including healthier lifestyles, genetic predispositions, and healthcare utilisation patterns. Consequently, it results in a lower mortality rate for women. To put this into perspective, consider this: a longer life expectancy implies a decreased likelihood of the policyholder passing away during the term of the insurance policy. Lower mortality risk translates into tangible benefits when it comes to term insurance premiums, making it a financially advantageous choice for women with up to 30% lower premiums.
Tailor-made plans
Historically, homemakers were dependent on their spouse’s financial standing to secure a life cover. The coverage amount was determined by the husband’s annual income, resulting in homemakers being covered for approximately half of the total assured sum. For instance, if the yearly income of the spouse is ₹5 lakh and the income multiplier is 15 times, then the full eligibility cover results in ₹75 lakh.
From this, if the spouse takes away the cover of ₹65 lakh, the wife is merely left with ₹10 lakh cover. Additionally, it’s important to note that term insurance policies typically start at ₹50 lakh of coverage, making this shared coverage potentially inadequate, especially for the women of the house.
With the advent of new-age independent term homemaker plans, this dependency has entirely been eliminated. Homemakers can independently purchase a cover of up to ₹1 crore with flexible pre-requisites like annual household income of ₹5 lakh and educational qualification of 10th/12th pass.
More affordable plans for women translate to higher insurance adoption among them.
This aids the family in sustaining their existing quality of life, meetingBy monthly EMIs, repaying loans, and pursuing lifelong objectives such as a child’s education. For example, a term cover of 1 crore for a woman aged 30 years, non-smoking, and salaried, would incur a monthly cost of ₹767 for a term plan, in contrast to the ₹927 paid by men for the same plan.
This reflects a nearly 28% reduction in premium compared to their male counterparts.
Moreover, a premium paid towards a term plan is eligible for tax exemption of up to ₹1.5 lakh under Section 80C of the Income Tax Act 1961. Additionally, the death benefit pay-out is also tax-free under Section 10(10D).
In conclusion, it is evident that term insurance plays a crucial role in empowering women, both economically and in terms of securing their family’s future.
(The writer is CBO, Life Insurance, Policybazaar.com)