Monday, August 20, 2012

Does your Wife Have Insurance?

Insurance – This is one topic that has been given a lot of attention in this blog. In spite of that, not many of us today still have the know-how to plan the insurance requirements of our family. Many people are under the impression that, Insurance is required only for the “Earning Member” or the “Bread Winner” of the family. Though this statement is not entirely false, it isn’t entirely true either. The purpose of this article is to analyze and find out if your Wife, who is the “Home Maker” or the more commonly used term “House Wife” needs Insurance…

Before we Begin – These days a lot of women, esp. in big cities are taking up lucrative jobs and hence they have access to financial advisors who teach them the importance of insurance. So, this article does not cover them. Our article here is going to exclusively concentrate on the “House Wives” of India who make up at least 70% of the female population in this country.

This article is not about Health Insurance. Health Insurance is Mandatory for every individual in the family irrespective of their age or what they do. So, don’t confuse the general term Insurance used in this article with health Insurance. We are only talking about Life Insurance.

Importance of the House Wife

In a country like India, the house wife contributes to the family/household in the form of cooking, educating the children and truck loads of other work. But, their importance or the value of the services they provide (In Monetary Terms) is greatly neglected.

Think this way, let’s say our Mother, who has been single handedly taking care of all household chores for the past 20 odd years is ill and cant do things that she used to up until a few weeks ago. So, you intend on hiring a maid, a cook, a cleaner etc. to help her. If you think of the monetary contributions we need to make to hire all these extra staff to run the family, you can realize the monetary worth of the contributions our Great & Sweet Mom has been doing for years without complaining even once.

We all know how much impact the loss of the home maker will have on families. The impact will be even worse if the family is in the low or the middle income earning group where they may not have the luxury to hire multiple people to help with the household chores.

Something that nobody can replace is the mental guidance and support that Mothers give their kids or that wives give their husbands. Unless we find a capable psychiatrist, this guidance and support will be greatly missed. This love and affection that the Mother or the Wife gives is priceless and CANNOT be replaced.

Does the House Wife Really Need Insurance

Let me start off by saying that NO ONE can replace a home maker mother and her loss will definitely have a significant impact on the rest of the family. To answer this question let us look at the things involved in the decision:

• Without a Mom at home, the child has to be left in a day-care center which would involve significant costs. This may not be easily feasible in low or middle income group families
• Without a Mom at home, we need a cook, a maid to take care of cleaning of the home, to take care of gardening work etc. The list will be pretty long and all these people will expect Salary in return for their services
• Without a Mom at home, children may need additional coaching (like Tuition) in order to excel in studies which again will require fees to be paid

Now, you ask yourselves the same question “Does the House Wife Really Need Insurance?”

I am sure the answer will be a Resounding YES.

Reason is pretty simple: The value of the services our mom gives to our family in monetary terms is incomparable. Every household activity will require a dedicated individual to handle it in the absence of the mother and they will expect a salary. In low or middle income families, this sudden onset of expenses may not be immediately feasible given the fact that the husband’s salary will not change by much immediately. So, at this scenario, if there was insurance, the family will at least have some surplus funds to utilize to try to bridge the huge gaping hole that the loss of the Mother leaves in a family.

Deciding the Value of Insurance for the Home Maker

There is a term called Cost Replacement Analysis in finance that can be used to calculate the value of something or someone for a certain duration. Simply put, you will calculate how much money is required to run the family in the absence of the Home Maker on a per month basis and then multiply it by 12 to get the annual number. Finally you multiple this by 10 or 15 in order to arrive at the figure that will be required for the next 10 or 15 years. This should be the monetary value of the Insurance that the Home Maker will need.

Some Last Words:

Proper Financial Planning is essential for any family. Open discussing and fairly calculating the insurance or investment requirements will not only build a prosperous family, it will also cultivate better understanding between the family members. The Home Maker is an integral part of any family and CANNOT be replaced. In their absence, the family has to try to keep going because life doesn’t stop. However, insuring the home maker will give the family the required monetary cushion to absorb the impact and try to recover from the devastating loss.

Happy Insuring!!!

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