Buying term insurance for domestic help, such as a cook, can be a thoughtful financial step, especially when the individual has dependents and limited savings. However, it is important to understand key
aspects, structure the policy correctly, learn about the coverage amount, and more before purchasing a term insurance policy so that it remains legally valid, easy to manage and claim-friendly for the family.
In India, retail term insurance policies are designed to be bought by the life insured themselves, even if someone else helps pay the premium. While an employer–employee relationship may create insurable interest in limited situations, most insurers prefer the insured person to also be the proposer and policy owner.
This avoids complications related to consent, ownership and claims, particularly if the employment relationship changes in the future.
Role of Government Schemes
The government-backed life insurance schemes provide an important starting point, even if the cover amount is modest for low-income households. Schemes such as the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) offer life cover of Rs 2 lakh at a highly affordable annual premium.
While this amount may not be sufficient as standalone protection for a family with multiple dependents, it serves as a crucial baseline for families that might otherwise remain uninsured.
The practical approach is to treat such government schemes as the first layer of protection. Enrolment is simple, premiums are low, and renewals are typically automatic through a bank account, ensuring quick liquidity for the family in case of an untimely death. Additional protection, if required, can then be layered through a standard term insurance policy.
Cover Eligibility and Structure
Insurers usually determine eligible life cover as a multiple of annual income. Depending on age, health and underwriting norms, individuals may qualify for cover equal to 10–20 times their annual income.
For someone earning around Rs 2 lakh annually, this could translate into a potential life cover of Rs 20–40 lakh, subject to insurer approval.
The most important thing is that the cook should purchase the policy in their own name rather than an employer purchasing the policy in their own name. Moreover, the spouse or spouse and children must be nominated as beneficiaries and the employer should support the arrangement by transferring the premium amount to the worker’s bank account or ensuring timely payment. This ensures that ownership and benefits remain entirely with the family, reducing the risk of disputes or claim hurdles.
