Buying life insurance is one of the most important financial decisions. Life insurance gives the much-needed financial protection to your family when the life events turn sour due to the demise of the working member. Though today it is more common to find women who are financially independent with careers, there is a significant number of homemakers, who choose home-management over external employment. In such family structures, it is easier to put a financial value on the life of the earning member while homemaker is mistaken with zero financial value.
Often when life insurance products are defined as ‘replacing lost income’, the idea that a homemaker needs life insurance products may seem as unimportant. But it is a myth! Though there may not be income to be replaced, the economic cost of a home-manager could be significant.
The loss of the homemaker can create several financial needs that did not exist previously:
It is true that a homemaker does not earn wages as the primary breadwinner of the family, but she is your support on the home front. If you have very young children, there will be a need for some form of childcare. You may opt for baby care centers, but per month cost will be Rs. 5,000 – 10,000 depending on the location at which the care is provided. Of course, if competent daycare is not available, nannies can cost even more. A family, with children aged two to five, deprived of the homemaker, can be forced to spend somewhere between Rs. 10,000 – 20,000 per month until the children grow up enough to look after themselves. Such a financial burden on an uninsured low/middle income group family can have a devastating effect.
Generally, the homemaker cooks regularly for the whole family. Be it breakfast, lunch or dinner; all are prepared to perfection. In the absence of the homemaker looking after all the household activities, all the burden must be taken care of financially. If you hire a full-time maid servant, you need to pay anything between Rs. 5,000 – 10,000 per month depending on your location and number of family members. Also, add the time you will have to spend in managing and looking after these activities around the house.
Not only the homemaker does the cooking, cleaning and babysitting, she is also the heart of the home. Losing this valuable member of the home will have a deep emotional impact on the other family members. Emotional disbalance caused by such loss could be significant. Even though insurance cannot fill the emotional void, the fiancial help can help in recreating the environment and councelling to manage the same.
Life will not be the same upon the demise of a family member. One possibility is that the breadwinner may go through deep stress and crisis that will result in the loss of a job. If it does, the family will need money to cover the transition to a new job or career. A voluntary break from work may even become a necessity. Often after the death of a parent, the family would want to relocate to be closer to the extended family. That resettlement will obviously cause a cost outgo, and may also result in loss of wages or even reduced wages upon finding a new job in the new location.
Homemaker as Income Contributor
This is probably something not many families think about when it comes to life insurance, especially when it concerns a homemaker. At some point, the children go to college for higher education, and the home-manager get more time for herself. In many single income households stay at home spouse usually takes up a part time job or leisure business activity and contribute to the household income. Often when the children become teenagers, and the domestic responsibilities become less, the homemaker can start working outside the home for extra money. But in the absence of the spouse, that potential source of income will vanish.
Taking care of the obvious
Last but not the least, we often forget about funeral expenses. At a minimum, Rs. 100,000 – 500,000 will be needed just to cover funeral and related expenses. But beyond funeral costs, there can be unpaid medical bills because of a series of treatments prior to demise.
It is better to take care of the obvious through life insurance of the homemaker rather than stepping into an uncertain vortex of crisis.
What Kind of Life Cover
Term insurance sounds most feasible and inexpensive way to insure the heart of your household. But, traditional life insurance products could be more suitable, considering, the saving potential. Additionally, any tax benefit available on such life insurance cover can be claimed by the earning member.