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Do I need term insurance if my spouse has it?

10 Oct 22      |       | ShareShare Share Blog Or copy link Copy Share this link via

Authored by: Anurag Ainapurapu
Reviewed by: Krupa Kenia

The Long Read


Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)

It’s very simple. Your unexpected demise (or your spouse’s) will not only be a tragic loss for your family, but it will also affect them financially. Let’s see how:

 

  • If both you and your spouse are earning, your household income will be impacted due to the loss of one of you

  • If one of you is not an earning member, the family will need extra care and your spouse may have to take a pay cut to look after loved ones. They may also have to hire professional help for caregiving of the children and the elderly. 

     

Additionally, if there is a change of heart between you and your spouse (such as divorce or separation), your family may no longer get benefits from your spouse’s policy.

 

So, both you and your spouse need to buy term insurance. 

 

You have two options for buying a term insurance plan:

 

  • Separate term plan

    • Each of you can get a separate term plan, especially if both of you are working

    • It can be customized to your individual needs, health condition, and finances

    • It does not depend on your spouse’s plan

 

  • Joint term plan

    • You can get this, especially when only one spouse is earning

    • The plan will cover both of you and may even waive the premium if one of you passes away

    • The best part about this plan is, it offers a comparatively higher life cover for the non-earning spouse than what they’d have gotten with a separate term plan

       

Our advice: Opt for a separate term plan, especially if both of you are working. In case you ever end up getting a divorce, you will each have your own term plan to fall back on instead of relying on a joint term policy.

Yes. Even if you don’t have kids now, you may have them in the future. 

 

And even if you are planning to not have kids in the future, you will still have each other and other family members who may be financially dependent on you. Your parents. Your spouse’s parents. Both of your siblings. Other loved ones with an insurable interest in your death. 

 

So yes, do buy term insurance even if you do not have children. 

 

Still confused? Here’s an easy guide on who should buy term insurance.

 

Yes, your spouse can get a term plan even if they are a homemaker, provided that they are: 

 

  • 18-65* years of age 

  • An Indian citizen/Non-Resident Indian (NRI)/ Person of Indian Origin (PIO) 

     

*varies from insurer to insurer 

 

But remember, your spouse’s term plan application approval will also depend on other factors such as your finances, their health condition, lifestyle habits, hobbies and other factors.

Yes, of course, you should. See, even if you don’t contribute financially, your family depends on you for caregiving. 

 

Even your spouse may need to cut back hours at work and be more involved at home. This may result in a pay cut. 

 

If you pass away unexpectedly, they may need to hire professional help such as a full-time maid or nanny to take care of the children, the elderly and so on. 

 

The life cover from your policy can come in handy and provide additional financial help to your family at such a time. 

Simple. If you are a man, then besides naming your wife as your term plan nominee, you must also do this:

 

Opt for buying the plan under the MWP (Married Women Property) Act while applying for a term insurance policy.

 

This Act ensures that only your wife and kids receive the term insurance payout. It can’t be claimed by creditors or even your relatives.   

 

And the best part, even though a Will overrides a term insurance nomination, this act will override a Will, which means, you can’t include the policy amount in your Will.

 

Use MWPA to protect your wife and kids financially, especially if your wife is a homemaker. 

 

Find out in detail how you can ensure only your wife receives your term insurance life cover with MWPA. 

 

If you are a woman, you can name your husband as the nominee on your term plan application and then simply add his name to the Will, stating that he has an undisputed right to the entire life cover. Make sure to register the Will to avoid any legal disputes. 

Your term insurance life cover should depend only on your current annual income and your policy duration and not on your spouse’s existing cover. Here’s why.

 

See, term insurance is just a replacement of your income that your family won’t have access to if you pass away unexpectedly. It is the amount that will help them avoid facing any financial crisis in your absence. 

 

Hence, when deciding your life cover, you should focus on your income, irrespective of how much cover your spouse has opted for. 

 

Here’s a simple formula that will help you determine how much life cover you should take:

 

Life cover = Policy duration (in years) x Your Total Current Annual income*

 

*It is the pre-tax annual income that you earn by actively working, aka the income that’ll stop coming in if you’re not around. It includes your salary and business income but not any rental income, interest, and dividend. 

 

To know more about how to decide your life cover, visit the KlarifyLife Term Guide and complete the journey.

 

If you are a homemaker or a stay-at-home parent, your life cover will depend on your working spouse’s income. It’s best to speak to an insurer of your choice or consult a financial advisor to discuss your options. 

It’s simple. You should stay covered only till your retirement if you are an earning member or till the time people who are dependent on you financially or for your caregiving become independent. 

 

Let’s see how:

 

Scenario 1: You are an earning member of your family.

 

In this case, your term insurance helps replace your income if you were to pass away unexpectedly. This money will ensure your family doesn’t face any financial struggle, especially if you are the sole breadwinner. 

 

Now, your age of retirement is likely to be around 60-65 years. It can be slightly longer if you are an entrepreneur. But no matter what, by the time you retire, you are likely to have met most of your financial responsibilities such as child’s education, loan repayment, elderly care and so on. Your family who was financially dependent on you earlier may not rely on your income anymore. 

 

So what’s the use of staying covered beyond your retirement? 

 

Scenario 2: You are a homemaker or a stay-at-home parent 

 

In this case,  you should stay covered only till your children or your aging parents/in-laws or anyone else who is dependent on you financially or for your caregiving will become independent. 

 

Avoid paying an extra premium amount by staying covered longer than that.

 

Keep in mind that term insurance offers no maturity benefit so it is not an investment. 

 

Plus, staying covered longer than necessary also increases your term insurance premium. You can get better returns if you invest that extra money that you pay towards premiums for additional policy years. 

 

This is the same reason why you should not opt for a term plan that covers you till 99 years of age. 

If you are planning to get a term insurance plan, you should get it as early in life as possible. Otherwise, your term plan premium will increase. Depending on your age and health conditions, the process may be more time-consuming. 

 

You may even be denied a term insurance plan despite being eligible for it. 

 

So yes, you should get one too immediately without further delay. That decision does not depend on whether your spouse has a term policy or not. 

 

Find out why you should buy a term insurance plan as early as possible. 

Yes, of course. Anyone who has an insurable interest in you which can be proved to the insurer can be made your nominee. 

 

What does insurable interest mean? Well, put simply, to be able to name someone your nominee, you must be able to prove that they will be financially impacted by your death. It can be done if you have a blood or legal relationship with that person. 

 

So to answer your question, yes you can make your child your nominee. 

 

But if your child is a minor, ie, below 18 years, then their name has to be accompanied by an appointee. The appointee must be above 18 years and can be either a family member, a friend, or really anyone else you trust (blood relation or not).

 

In case you pass away unexpectedly, the appointee will receive the life cover on behalf of your minor child. They can either use it for their care, education and upbringing or pass it on to them when they turn 18. 

 

Find out more about how to ensure your minor child receives your life cover.

Yes. As long as you have family members who are dependent on your income or caregiving, you should get term insurance. 

 

No doubt your premiums will now be higher compared to what you’d have gotten if you had bought the plan early. But better late than never, right? So don’t be discouraged. There are a few steps you can take to save money:

 

  • Stay covered only till your retirement and avoid paying higher premiums for an unnecessarily long policy duration

 

  • Don’t overinsure. Choose a life cover that will only replace your income till you earn. Remember, the higher the cover, the higher the premium. 

 

  • Add only the essential riders to avoid a premium hike 

     

 

  • Buy online. Term insurance plans can be 5-10% cheaper when bought online. 

 

  • Compare term plans from different insurers for the best premium rate and policy benefits

 

And finally remember, the financial security your family will have in your absence is worth the high premium you’ll pay right now. So don’t delay further and buy that term insurance plan today. 

 

Find out more about saving term plan premiums when you are in your 40s.

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