Term Insurance For Self-employed: Secure Your Business And Family

Term insurance is a pure life insurance product without involving any components of savings or investments. It does not offer any maturity benefits but death benefits to the dependent family members of the insured individual, provided the insured and the policyholder are the same. It acts as a financial protective shield for the family despite the insured’s demise.

What is term insurance for self-employed?

Term insurance for self-employed people is a form of life insurance offering comprehensive coverage to their family members during any unfortunate event. If the policyholder, who happens to be the insured person, passes away, the designated nominee or beneficiary will receive the death benefit equivalent to the sum assured amount. It is a comparatively more affordable product.
The payout can be either in the form of a lump sum or a fixed amount at regular intervals, depending on the terms of the policy concerned. This money can be used for running the business, paying off outstanding debts, or loans, covering family expenses, etc.
Term plans are especially relevant to self-employed individuals to ensure the economic security of the family despite their absence. They need not have to compromise on the standard of living even under challenging circumstances.

How does term insurance work for a self-employed individual?

Term insurance for self-employed like doctors, lawyers, and business owners, works identically to that of any other standard term plan. The primary source of difference between the term plans for self-employed and salaried individuals is the income source and income proof.
But, they, too, need to ensure punctual premium payment for a pre-defined period to ensure the protection of their family after their demise.
Term plans are all the more important for self-employed people, especially if they are the principal breadwinners in the family. The sooner you purchase, the more affordable it becomes without compromising on the coverage expanse.
To enhance the coverage, you can add befitting riders to it if applicable by paying additional premiums for each rider chosen. Some of the most popular riders include the accidental death benefit rider, critical illness rider, etc.

Features of term insurance for self-employed

Some of the most highlighting features of term plans for self-employed individuals include:

1. Flexible premium payments: Self-employed people are eligible to choose from several term plans premium payment options, like single payment, regular payment for a stipulated time, or a pre-defined limited payment tenure where you pay the premium for a comparatively smaller part of the span, without affecting the coverage extent for a lifetime.
2. Customized coverage: The term plans for self-employed people often allow customisable coverage amounts, where they have the flexibility to opt for coverage amounts, like 1 Crore term insurance, 2 Crore term insurance, etc.
3. Income replacement rider: In case the insured self-employed individual passes away during the plan tenure, this rider covers the pay of the assured benefits to the beneficiaries at regular intervals, acting as an income replacement in challenging circumstances.
4. Premium waiver rider: This unique quality offers the self-employed insured policyholder individual the benefits of a premium waiver in case they become unfit for working or earning.
5. Death benefit rider: This feature ensures that your designated nominee receives the guaranteed payout of the sum assured amount as per the chosen plan term. There also exists an accelerated death benefit rider where the concerned individual gets diagnosed with terminal ailment(s). This enables them to get a part of the sum assured amount which can used for treatment, paying medical expenses, and fulfilling other financial requirements.
6. Conversion option: Certain insurers often offer conversion options, where the term plans can be easily converted to a pure and permanent life insurance product like whole life insurance.
7. Tax benefits: Term insurance tax benefits are another attractive feature of this sort of investment. It allows a deduction of up to INR 1.5 lakhs per annum u/s 80C. In case, you have any health insurance rider to your base plan, you can also claim tax deductions u/s 10(10D).

How do you choose term insurance for self-employed?

Choosing the right term insurance for self-employed becomes easy when you consider these significant factors while purchasing:

1. Understand: Understanding all rules and regulations of a term plan is significantly essential, including all the inclusions and exclusions, to avoid any misunderstanding during claim settlement.
2. Affordability: You must ensure that the premium amount does not prove a burden for you. It must not strain your budget.
3. Policy features: You must compare to ensure a critical evaluation of the plan features with other competent plans to grab the best deal.
4. Assessment: You have to assess your requirements and then proceed accordingly. Unnecessary investments will eventually lead to unnecessary financial drainage.
5. Consider riders: You have to pay for each rider you choose. You must be wise enough to choose only the riders you require.
6. Claim settlement: Consider the claim settlement ratio and claim settlement process to ensure guaranteed coverage and claim settlement.
7. Review: Review the plan performance at regular intervals, especially for self-employed individuals.

Conclusion

We have carefully highlighted all the principal aspects of term insurance for self-employed. Consider all the plausible prospects and then proceed.