Can you take a term insurance policy for your cook or domestic help? Here’s what you should know

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• Employers can buy term insurance for domestic workers with approval.
• Policies require insurable interest and written consent.
• Assisting workers to buy their own policy is often recommended.

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In many Indian households, the cook, driver, and domestic worker are more than just employees. They become an integral part of the family. The question that arises is: Can you buy a term insurance plan for your cook or domestic worker? The answer is yes, but with some rules and regulations.

What is insurable interest?

Insurance companies sell life insurance only if there is something known as “insurable interest.” This means that the person purchasing the insurance plan has to have a legitimate financial interest in the life of the insured. In other words, there has to be a financial loss in case of the person’s death.

In the case of a domestic worker, the employer may have insurable interest, especially if the domestic worker’s services are essential to the family. However, the insurance company will closely examine the relationship and motive for the insurance before approving it.

Consent is mandatory

You cannot purchase a life insurance plan for someone without their knowledge. The domestic worker has to give their consent in writing, and also has to undergo medical tests if necessary. The insurance plan is purchased in the name of the domestic worker, not the employer.

In most cases, it is recommended that the worker or their family members be nominated as nominees. This means that in case of an unfortunate death, the amount goes directly to their dependents.

Who pays the premium?

The employer can opt to pay the premium as a gesture of goodwill or as part of employee welfare. However, it is necessary to be transparent about it. The insured individual must be made aware of the amount of insurance, the term, and the conditions.

Some families would like to assist their domestic helpers in purchasing their own insurance policy rather than being the proposer themselves. This would eliminate any legal complications and keep things simple.

Points to consider before buying

Insurance companies take into account the income of the individual while determining the coverage amount. Since most domestic workers have limited incomes, the coverage amount may be limited. It is also worth exploring government-sponsored schemes like Pradhan Mantri Jeevan Jyoti Bima Yojana, which offer affordable life insurance.

Before proceeding further, it is necessary to take advice from an insurance advisor about the documentation and eligibility requirements.

FAQs

1. Can I be the nominee when I purchase the policy?

It is generally preferred that the nominees of the insured individual are family members. Being a nominee without any financial reason may lead to complications.

2. Do I need to undergo medical tests?

Yes, depending on the age and coverage amount, medical tests may be mandatory.

3. Is it better to assist them in purchasing their own policy?

Yes, in most cases, that would be the best option. It is always simpler and more transparent to assist them financially to purchase their own term insurance.