The motive of taking a life insurance policy is to cover the risk of loss of income due to premature death of the earning member of a family. Hence, the maximum limit of a life insurance cover – especially of a term life insurance – depends on the Human Life Value of a proposer, which is calculated on the basis of the earning potential of the person.
So, higher the present income and longer the earning life (before retirement) of a person, higher will be the eligibility limit of taking a life cover.
As homemakers don’t earn officially, they were not allowed to apply for a separate term life insurance earlier and the spouse of a homemaker was allowed to propose for the homemaker if the maximum eligible limit of the proposer wasn’t exhausted.
For instance, the spouse has an annual income of Rs 5 lakh and the income multiplier is 15 times the annual income. He will be eligible for a total cover of Rs 75 lakh, out of which assuming he takes a cover of Rs 50 Lakh, the wife will be eligible for only half the cover amount i.e. Rs 25 lakh. And in the same case, if the husband ended up taking Rs 75 lakh cover, the wife is no longer eligible to take any term cover basis the rules.
However, an earning member would have more time to devote to enhance his/her earning capacity, only if he/she doesn’t have to allocate time to do household work. So, a homemaker also has a role in enhancing the household income, which is now recognised by the insurers, resulting in introduction of the independent term insurance for the homemakers.
An independent term insurance plan is basically a term plan that can now be independently bought by homemakers. While there were policies available to cover housewives earlier too, the condition was that it should be bought by their earning spouse. Also, they would only be covered for 50 per cent of the sum assured where the income multiplier would be dependent on their husband’s annual income.
The recent launch of independent term plans for homemakers has widened the scope of coverage for homemakers with the help of which they can buy term plans irrespective of their spouse’s policy or income status.
“With the launch of term plans for housewives, the earlier strict conditions are no longer applicable. Currently, insurers such as Max Life, TATA AIA, Bajaj Allianz, and Bharti AXA are offering independent term plans to housewives where husbands’ existing life cover is also not required. To make it more accessible, there is only one condition to fulfil i.e, if the household has an annual income of over Rs 5 lakh, the housewife in the age group of 18-50 years can buy the independent cover of Rs 50 lakh,” said Sajja Praveen Chowdary, Business Head – Term Life Insurance, Policybazaar.com.