By Anil Kumar Singh, Chief Actuarial Officer, Aditya Birla Sun Life Insurance Co. Ltd.
Whether she’s a professional and the sole earner in her household, working part-time during school hours, or the stay-at-home mother running the household – a woman is a significant member of a family. Given her important contribution to the household, it is unfortunate that Indian women still remain vastly under-insured particularly when it comes to life insurance.
While India’s Life Insurance penetration is comparable to Asian peers at 2.8 per cent of GDP, the protection gap is alarmingly high especially among women. A huge chunk of them lacks basic awareness about life insurance, its importance, and offerings. Women today have emerged as significant contributors to the finances of a family and its future financial goals. However, we do not give due attention to the risks existing in a woman’s life, which is at times even more than a man’s. It is therefore evident that that a woman should take cognizance of her importance in her family members’ lives and opt for solutions that offers protection against life risks, can be an emergency fund and will also fulfil her and her family’s financial goals in the future.
Here are a couple of points women need to know for understanding life insurance better.
What they need to know about Life Insurance – It is a myth that life insurance provides only death benefits, conversely; it is much more than that. Life insurance is a risk protection vehicle through which an individual can insure themselves against inability to work, set aside money for retirement or protect themselves against the loss of their assets. Life Insurance has a wide range of products that could come in handy to meet one’s financial goals such as buying a home or a car, for planning one’s dream vacation, funds for a new business, planning weddings and even child’s education. It also acts as an income replacement tool and is a must for any earning individual.
Opting for life insurance – WHY, WHEN and HOW! Awareness is the key. It is important for women to first analyse their financial goals and needs before opting for the right life insurance solution. They should have complete clarity on what they want to protect and why, further analysing when they need to protect it. Post these one should decide on the life insurance solution to opt for.
Any earning woman can choose from the following plans depending upon her life stage and financial needs.
If you have dependents, you must have a Term cover. It is the safest way of arranging financial safety, if unfortunately, you are no longer present to provide for your loved ones. Also, if you have a loan, you cannot miss having a term plan. Term plan provides a comprehensive pure protection at a relatively low premium.
It is vital to build a strong corpus for the longer run. Endowment plans are for you. Providing dual benefit of a life cover and goal-based savings under a single plan, endowment plans offers a lump sum payout on and can give you assured returns, whatever be the market conditions.
Women must plan for a comfortable retirement and annuities can be one of the best options. The individual starts receiving a certain fixed amount which can be broken into monthly, quarterly, annual, or even a lump sum payment after completion of a pre-specified period.
Unit Linked Insurance Plan (ULIP)
ULIP comes with an integration of protection and investment wherein the investment can be made in stocks, bonds, or mutual funds. One can customise her investment according to her needs and risk appetite as the returns on investment are linked to market movements.
Once you know the plan, it is also prudent to understand the following factors before purchasing the right life insurance policy.
Level of cover
It is the total sum of money that one receives in the event of a claim. To choose the right level of cover one needs to take away the benefits or covers that they already have from the total amount that their dependants need. Also, to calculate the sum insured, the rule of the thumb is to multiply the annual income by 10.
This is the amount an individual pays for the insurance policy. It is necessary to find out the premium amount and the paying options. Depending on her financial conditions one may choose the premium option – e.g. like lump sum or the regular premium on monthly, quarterly, half yearly or annual basis. It is better to compare the premiums and offerings of various products to choose the right policy.
Every woman is unique and would want the insurance company to see her as an individual with unique needs. Therefore, it is prudent to check if the policy allows customisation and addition of riders to meet their specific needs, rather than a policy which is one-for-all.
It is important to know that Life insurance rates increase as you age and develop health conditions. The pandemic has taught us that one’s life is always prone to various risks and uncertainties and so safeguarding them at the right time is extremely crucial. Therefore, it’s better to buy sooner rather than later. So, understand your protection needs and devise a financial plan now.
Life insurance companies today provide various types of solutions which offers guaranteed or safer returns. From wealth protection to wealth creation, a wide range of policies are available. Women should first determine their needs, set their future goals, and should accordingly opt for the right life insurance policy and secure their, as well as the future of their families.