Term policies: Why women need to buy life insurance

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Published: January 30, 2019 12:35:06 AM

Policies purchased under MWP ensure that the proceeds are utilised for no other purpose than the welfare of the wife and children.

An endowment policy maturing at the age of 60 or beyond is one of the best saving tools for women.

Data from Insurance Regulatory and Development Authority of India (Irdai) show that 90 lakh women bought life insurance policy in 2017-18. During the same period, 1.91 crore policies were purchased by men. So, women accounted for about one-third of the total business that year.

This is a substantial improvement in the representation of women in life insurance during the previous decade, when private insurers had strengthened their foothold. During 2017-18, the insurance agents and other intermediaries have been successful in selling insurance to only 139 women out of a population group of 10,000 women. This indicates that either a large number of women were not approached by them or a large number of women have declined to consider life insurance as a beneficial financial instrument.

There is an urgent need to educate women about the benefits of buying a life insurance policy which has several features that can serve them in many ways. Unfortunately, insurers have rarely initiated women-focused activities to create awareness about the benefits of life insurance.
Instrument of financial security

Life insurance is looked upon as an instrument of financial security for family members in case the bread earner unfortunately dies. Hence, the earning male member of the family is expected to buy life insurance. It is observed that only the third or fourth policy in the family is on the life of the wife or the girl child. Women, however, generally outlive men and they require a large fund for their own long-term care. Hence they require systematic financial planning on their part and they must actively consider buying life insurance. An endowment policy maturing at the age of 60 or beyond is one of the best saving tools for women.

Pay premium on time

A life insurance policy does not require regular monitoring except that one has to pay the premium on or before the due date or well within the grace period. It is free from complications of evaluating investment performance of funds and switching of funds from one category to another category. The conditions of the policy are such that discontinuation is discouraged and the policy keeps earning for itself by way of bonus accruals. If the maturity is planned at higher age beyond 60 years, then she can look forward to a large lump sum amount which she can collect without any hassles from the insurer on maturity of the policy and invest the same for buying annuity policy for herself. A part of the total amount she can use for immediate requirements, if any. Some companies charge lower premium from women because they have better longevity than men.

No social security cover

Some women buy insurance when they feel their life is at higher risk due to occupational hazard or health hazard unique to females or even due to several archaic social rituals or practices. Another motivation for buying life insurance by women is the fact that in our country there is no social security system to support an orphan child or a child who has lost her mother or both parents. If housewives buy insurance, the premium goes out of the income of the husband, who is eligible for income tax relief under Section 80C. An earning woman is also eligible for tax relief. Premium paid by any individual or by his/her spouse is exempt from income tax up to `1.5 lakh under Section 80C. The entire proceeds of the life insurance under maturity as well as death claims is tax free. Hence, this is one investment plan which has least tax implications and the policyholder is not required to take services of CAs and other consultants.

In fact, every husband must buy an endowment policy for his wife with maturity date coinciding with her sixtieth birthday. Term policy is preferred by women in developed countries but in India, endowment type policy is more suitable for women. If the husband doesn’t buy a policy for his wife, he must take care to buy a policy on his own life with adequate sum assured under Married Women Property Act (MWP). Policies purchased under MWP ensure that the proceeds are utilised for no other purpose than the welfare of the wife and children. This policy cannot be attached by any authority for any reason.

The writer is former MD & CEO, Star Union Dai-ichi Life Insurance. His new book ‘The LIC Story: Making of India’s Best-known Brand’ is on the stands now.

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