Life Insurance: A Potent Tool For The Woman To Secure Her Identity

Avani Chaturvedi, Bhawana Kanth and Mohana Singh – these are just three accomplished women who inspire us every time we hear a sonic boom up in the sky. They are pilots of the Indian Air Force who uphold the word ‘Fighter’ in their badge of honour. This International Women’s Day, we salute the courage, valour and the indomitable spirit of women, who serve society in all the many roles they  play.

Most women are actively involved in planning the monthly finances of the family and yet the percentage of women who develop a financial plan for themselves is low. According to the insurance regulator’s latest annual report, out of the total number policies sold in the FY 2019-20 the share of policies bought by women has decreased to 32 per cent compared to 36 per cent in 2018-19.

Today’s working women are equal contributors to the family’s finances and society and, therefore, should not undermine themselves and must take charge of planning finances for themselves. This International Women’s Day, the first step would be to make a pledge to start the financial planning process. After all, big things are achieved by taking baby steps. The simple approach one should have is ‘First Protect Then Save’.

Why should term insurance be the first financial instrument to be purchased?

As working women, if you have loved ones who are dependent on you and will face financial hurdles in your absence, then your first priority should be to purchase a term insurance plan. This creates the necessary foundation upon which a strong financial savings plan can be built. Term insurance is an important financial tool that protects dependents from the risk of loss of income due to an untimely demise. In a broader sense, it helps in mitigating risks and ensures a safety net for the family or dependents.

New-age term plans also come with critical illness benefits. As instances of lifestyle-related ailments such as heart, ovarian and breast cancer, diabetes are on the rise, it is prudent to include this in the plan. This benefit makes a lump sum payout, ensuring that a critical illness will not result in a drain on finances or accumulated savings. The life cover component continues even after the critical illness benefit is paid out, providing financial security to the family members.

Term insurance plans are affordable, especially when compared with other material comforts and tangible assets such as a big-screen TV, international vacations, fancy dinners and expensive cars that capture the lion’s share of our wallets. For instance, the insurance premium for a car costing Rs 10 lakh is about Rs 35,000 per annum. On the other hand, the premium for a life cover of Rs 1 crore for a 30-year-old non-smoking woman for 50 years will cost approximately Rs 20,000 per annum.

As more and more women contribute to household expenses, joint life coverage option is an ideal way to provide financial security to the partner and family with a single product. Couples can choose from the single and double payout option. In the single payout option, on the demise of any one of the partners, the sum assured is paid to the surviving partner and the policy is terminated. In the double payout option, upon the demise of a partner, the surviving partner is paid the sum assured and the policy continues to be in-force, and thereafter on the demise of the surviving partner, the sum assured is paid out to the nominee.

How to build a savings pool over the long-term?

Once you have sorted out what kind of term plan would work well for you, your next priority should be to systemically build a savings pool. Here too life insurance companies have a plethora of options to choose from. Depending upon your risk profile, you can opt for a traditional savings life insurance plan, which is ideally suited for risk-averse customers. It will give you a guaranteed maturity amount at the end of the policy tenure, along with a life cover that would be seven to 10 times your premium amount.

Unit-linked plans are best suited for customers who have a long-term view and a higher risk-taking ability as these plans have an exposure to the markets. Both these types of plans offer flexible pay out options and the sum assured is paid out to the nominee in case of the demise of the policyholder.

In summary, purchasing a suitable insurance plan financially secures a woman and her dependents, thus playing an active role in the family’s financial planning process. It gives her a sense of self-worth, security and comprehensive emotional stability to endure facets of unfavourable circumstances, which have the potential to cause irreparable damage.

The author is the Executive Vice President and Appointed Actuary at ICICI Prudential Life Insurance

DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.