Term Insurance

Advisor’s Tip: How Working Women Can Choose the Right Term Plan for Their Family’s Future

By Admin
Mar 01, 2021
how working women can choose the right term plan

A woman of today is no longer confined within the four walls of her house. Women these days have stepped out of their households and have entered the professional world. They are no longer dependent on men for their financial and economic needs. Many women have become financially independent. Women are therefore contributing a fair share in the family income these days. 

Even if a woman is not the only breadwinner in her family, her contribution to the finances of her household may ensure the security of her aged parents or her children or her loved ones who depend on her. So, she should consider buying an insurance policy to ensure financial security for those who she would leave behind. 

There are a lot of insurance plans available in the market these days. But experts recommend a term insurance plan for working women. Term insurance is one of the cheapest and easy to understand insurance policies that every working woman must consider buying. In fact, term insurance plans have become a popular insurance option among women in India.

What is a Term Plan? 

In simple terms, a term plan is meant to provide financial security to everyone who might be dependent on the income of the policyholder when they are no longer around. Many working women know that term insurance is a very affordable way to guarantee financial security to their loved ones in case the worst happens to them. The premium to be paid for term plans is nominal which makes it a wise option. The premium depends on your age, the cover you choose and the tenure of the policy. 

For example:

A term cover of say,  INR 1 crore for a woman who is 30 years of age for a period of 30 years will cost around INR 6,500 to 10,000  per year.

Age

Gender

Sum Assured

Policy Term

Annual Premium

30

Female

INR 1 crore

30 years

INR 6,500- 10,000

But it is a death risk plan. So, there is no maturity benefit here.

Why do Working Women Need a Term Plan?

But anyone may ask: why do working women need to buy a term insurance plan? What good will come of it? Well, let’s find out.

  • As we have mentioned it from the very beginning of the article, an insurance policy, a term plan to be precise, will be of help to those who might be dependent on the policyholder. It can be explained with the help of the following example:

You are a working woman and also a single mother with a child who is only ten years old. It’s obvious that the child will depend on you for a lot of things, like nutritional needs and educational needs. But what if someday something happens to you? Who will the child depend on? This is where a term plan comes in. A term plan will protect your child from financial worries in your absence.

  • Even if you are not a single mother, your income forms a part of the family income and in the event of any untoward happening, your partner’s financial burden will be lessened if you opt for a term insurance plan. It will also help to clear off your debts when you are not there anymore.
  • Term plans offer a combination of life risk cover along with critical illness protection through a rider or an inbuilt feature in the base plan. Everyone knows how costly medical services have become and how expenses for the same are on the rise. What will happen if you are diagnosed with a terminal illness and you haven’t invested in an insurance plan? It will turn out to be a nightmare for your family. But a term plan will surely be your saviour in a situation like this. In case you are diagnosed with a critical illness, you will receive a lump sum benefit. If your disease leads to death, your family will receive the balance amount as per the policy agreement.
  • Nobody can predict an accident. In case you are left disabled by an accident, a term plan will come to your rescue. The insurance company will offer periodic payments on a monthly basis and you can use this money to clear off debts or to meet your household expenses.
  • When it comes to term insurance, women can enjoy special premium rates.
  • Term insurance offers non-smoker premium rate benefits for women who lead a healthy life.

How to Choose the Right Term Plan?

Now that we know why it is important for a working woman to buy a term plan we must focus on the most confusing yet the most important part of the matter, i.e. the tips and tricks to be kept in mind while choosing a ‘good’ term plan. Choosing the right term plan is not a piece of cake at all. In fact, it is a difficult job and it is important to choose wisely. Although there is no hard and fast rule for making such a choice, there are a few suggestions put forward by experts. So, let’s take a look at those:

1. The Assured Sum: 

The premium to be paid for a term plan is quite low. This allows you to afford a pretty high coverage. So, a plan should assure you of an optimal sum based on your financial goals. We all know how high expenses have become these days. So, it is important to make sure that your plan contains an assurance about an optimal sum to be paid to you or your family in case of unavoidable and unforeseen circumstances. Most of the insurers tend to buy term policies starting with a sum assured of INR 25 lakhs and based on your income the amount can rise to about a crore or two. According to experts, you should choose a term plan which will offer 15 to 20 times your income.

2. Premium:

It is advisable to check if the premiums associated with a term plan are affordable. Before you choose to buy a plan, please compare the different term plans available in the market and choose the one which will suit your needs. If you compare, you can figure out which plan is going to be the best for you.

3. Riders: 

A little extra protection doesn’t hurt. Always consider the riders before you set out to buy a plan. Riders are additional coverage features which are available only after the payment of an additional premium. The additional premium is minimal. You can consider the riders that are listed below:

  • Accidental death benefit rider- In case of accidental death, this rider pays an additional amount of money.
  • Critical illness rider- In case you are diagnosed with a critical disease, you will be paid a lump sum benefit since this rider covers major critical illnesses.
  • Premium waiver rider- If an accident leaves you disabled, this rider will waive future premiums.
  • Terminal illness rider- It pays an additional assured amount. Besides, it waives future premiums if you are diagnosed with a terminal illness.

4. Claim Settlement Ratio (CSR): 

It is better to choose a plan with a high claim settlement ratio. CSR is the insurance claims settled over the total insurance claims received by the company in the course of a year. If the CSR for a particular company is low, it implies that the company is honouring lower claims than what it received and might have rejected some claims. What is the point of having an insurance plan if your claims are rejected by the provider? So it’s always better to check and compare the claim ratio of various insurance providers. CSR is not the only criteria which you must take into consideration. But it is one of the most important factors which you must keep in mind before buying a plan.

5. Solvency Ratio:

Simply put, solvency ratio determines if an insurance provider is financially capable of handling your claims at the time of an emergency. According to IRDA, the solvency ratio of a provider should be at least 150%. Any figure less than that might be considered as a red flag.

6. Total income: 

You can plan to opt for a term plan after carefully considering the total income of your family.

If you run into a major debt or loan, consider choosing a term plan with a long tenure so that your loved ones face no difficulty in clearing off your debts in case of any mishap.

7. Age of the Insurer: 

It is better to buy a term plan when you are fairly young since the premium to be paid increases with your age.

8. Consult an Expert:

Always consult a trusted and reputed advisor before you decide to buy a suitable term plan.

9. Reputation of the Insurance Company:

Before you consider buying a policy, it is important to verify if the company can be trusted. You should check out the government records of the providers or if they have violated the regulations of AUM or IRDA.

Key Takeaways

With women rising to the level of breadwinners, it has become their responsibility to secure the future of those who are dependent on her. In case anything happens to her, her children’s education or the healthcare of her parents might be at stake if she does not leave behind anything. Although many women are aware of this fact and choose to buy term insurance plans to ensure financial security for her near and dear ones, quite a few of them are unaware of its benefits or its importance. 

A survey by Max Life Insurance discovered that only 19% of women in metropolitan cities own term insurance policies, as compared to 22% of men. The study also revealed that most working women focus their savings on children’s education and family expenses, while their male counterparts are supposed to look after all the financial investments necessary to secure the future of their family in their absence. But if more women choose to invest in term plans, it surely will reduce the burden of their partners. If she is a single woman, her term plan will be the protective shield of her elderly parents or of her children (if she has any), in case anything happens to her. 

Her term insurance will be of tremendous help to her as well, in case she meets with an accident or is diagnosed with cancer or any other diseases. But before buying a term plan, it will be wise of her, if she follows all the tips that we have discussed and chooses a plan which will be the most suitable for her. Simply put, it is indeed important for working women to invest in term plans in such times of uncertainty.

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