Changing work and social patterns have resulted in life insurers offering policies that meet the needs of people juggling work and home life.
While newer style home duties policies may seem to offer an easy solution for the protection needs of homemakers, as Rachel Leong from BT Financial Group writes, advisers should also consider other options.
This is particularly the case if someone works part-time or may be planning a return to work in the near future.
The correct policy option will ensure clients are set for the present and the future, according to Rachel.
Increasingly, parents are juggling both work and home duties, which means there are particular considerations for risk advisers looking for strategies to meet the needs of this diverse client segment, during different life stages.
In Australia, the role of the homemaker – someone who manages the home – still tends to be predominantly performed by women. However, increasingly we are seeing a trend where more women are taking shorter career breaks and returning to the workforce sooner after having children or working part-time. Out of all working Australians, 21.8% are women working part-time.
There are a range of life insurance policies suitable for people that now fall into the category of ‘homemakers’, whether they be stay-at-home parents, part-time workers, or employees on a break before returning to the workforce.
‘Home duties’ policies
Most retail insurers offer specific income protection and total and permanent disability (TPD) policies for clients performing home duties. Generally, they are aimed at individuals who are wholly involved in performing home duties, or those that engage in less than 20 hours of paid work per week.
The underlying definitions are aligned with day-to-day tasks carried out by a stay-at-home parent. For example, to be eligible for income protection benefits, a common requirement will be that due to a sickness or injury, the individual will be unable to perform normal household duties (such as cooking, cleaning, washing clothes, shopping, and caring for children) and are under the regular care of a doctor. Similarly, for TPD policies, the usual requirement would be that the individual has been unable to carry out normal household duties for a period of time (eg, 3 months), and they are unlikely to be able to do so again in the future.
If your client works 20 hours or more per week, then they will generally be eligible for occupation-based cover, which has more expansive coverage than home duties cover. TPD cover can be based either on their current occupation, or any occupation for which they are generally suitable (based on their career history). Where the TPD policy is held outside superannuation, a broader definition allows the possibility of a claim if the insured person is still able to work, but is employed in a role that pays less than 25% of their previous earnings.
Home duties vs occupation-based cover
As the ability to access certain types of policies is determined by the client’s hours of work, often it is not a choice as to whether a home duties or occupation-based policy can be offered – it is one or the other. However, when a client is planning on taking a break from the workforce or wholly assuming responsibilities in the home, this raises the question as to what type of cover should be recommended, given that hours of work may change in the future.
Acquiring cover during pregnancy
For life and trauma benefits, unless there has been a history of complications, cover will usually be considered at standard rates. Therefore, unless there is a history of serious medical complications, pregnancy should not be a factor in determining whether cover is available.
For TPD benefits, like life and trauma, unless there has been a history of complications, cover will usually be considered at standard rates. However, if the client is more than 30 weeks’ pregnant (or, for some insurers, defined as being in the third trimester) then attaining cover may be more limited. Some insurers will not approve TPD under an ‘any occupation’ or ‘own occupation’ definition, instead requiring the policy to be issued with a ‘home duties’ TPD occupation. Others may not offer cover, or will defer a decision until after the birth.
Depending on the insurer, Income Protection cover is usually available for employed expectant mothers up until the 30th week of pregnancy or up to the third trimester. Once past this point, most insurers will not offer cover and will defer a decision until after the birth and the mother has returned to employment. What should be noted is that if a client obtains occupation-based income protection cover, and subsequently goes on maternity leave, this may impact the ease of, and ability to claim.
Therefore, if given the option, what is the most appropriate form of cover, occupation-based or home duties cover? As occupation-based cover provides broader definitions, if available, this is the preferred type of policy. This will mean that when your client returns to work, they will have the appropriate type of cover in place already.
Protecting your client’s children
The importance of ‘Child Cover’ can often be highlighted though one simple question: “Would you like to be able to stop working and care full-time for your child if they were to fall seriously ill?” The answer would be unanimous. Therefore, while it’s easy to demonstrate the need, it can often be a difficult discussion for advisers to have with parents. This is why many insurers include $10,000 free child cover when an adult trauma insurance (also known as ‘living insurance’) policy is purchased. However, this will not cover a parent’s salary for a material amount of time and, therefore it’s an important point to raise.
When considering insurance for homemakers, attention often falls on policies which incorporate home duties definitions. While these have a role to play, many clients may qualify for other policies which are better suited to them in the future, such as occupation-based cover. In addition, it is important not to forget that women are spending less time out of the workforce than ever before to raise families, and that this only relates to one life stage. Smart strategies can ensure comprehensive cover that changes and adapts over their lifetime.
Rachel Leong is a Senior Manager – Product Technical for Life Insurance at BT Financial Group
University of Queensland researchers Janine Baxter and Belinda Hewitt note that Australia still has a strong male-breadwinner institutional framework. (Negotiating Domestic Labor: Women’s Earnings and Housework Time in Australia, November 2012).
 Workplace Gender Equality Agency: Gender workplace statistics at a glance, February 2018.