Self-employment requires you to be adaptable, and independent, and to follow your entrepreneurial goals strictly. However, it comes with its own set of rigorous challenges. Although you may relish your independence, you must think about the financial safety nets that will protect your family under unanticipated circumstances. This is where a term insurance plan enters. While everyone should invest in a life insurance plan, for self-employed individuals it is imperative to have affordable and adequate coverage.
Let’s take a look at 8 major reasons why term insurance for self-employed is important.
1. Unreliable Income Source
While professionals on salary have a predetermined minimum amount credited to their bank account each month, business owners, freelancers, and other self-employed people cannot guarantee their income. As a result, their inconsistent financial flows end up depleting their savings. Purchasing a term insurance policy gives you financial security and keeps your loved ones safe from being in a financial crunch.
To help you decide how much coverage you need, you can use a term insurance calculator to determine the coverage you need.
2. Costs of Transferring Business Ownership
If something were to happen to you or prevent you from being able to actively engage in the firm, you should think about the expense of transferring ownership to someone else. It can take some time for the next person who could be your friend or family, to catch up with market trends, business demands, etc. However, they will require constant funding to keep things running.
3. Absence of Employer Benefits
You do not receive workplace benefits like health and life insurance covers, employee provident fund, etc., as compared to employees in the corporate sector. This makes it important for you to invest in term insurance for self-employed since you are the employer yourself. In case something happens to you, your invested money gives a financial shield to your loved ones.
4. Tax Advantages
Being self-employed does not stop you from using tax-saving schemes to lower your income tax. You can receive tax benefits as per section 80C of the Income Tax Act by purchasing a term insurance plan. You can save up to ₹1.5 lakhs in a financial year by paying the term insurance premium. A term insurance calculator can help you see the potential savings. Also, keep in mind that the death benefit that your nominee receives is completely tax-free under Section 10(10D).
5.Retaining Employees
Buying term insurance for your employees can be a great incentive and a smart way to maintain the organisation’s viability. A significant employee’s sudden death might put a financial burden on the company. With the sum assured covered by the plan, the organisation can recover such financial loss.
6.Pay off Outstanding Debts
If you have personal loans, mortgages, or other financial obligations, then a term plan can be a saving grace for your loved ones. In your absence, especially if you are the primary earner they will find it difficult to manage these debts. However, the term insurance payout can be set up to pay off these outstanding debts, sparing the family from having to shoulder further financial obligations.
7.Term Insurance is the Most Affordable
When it comes to life insurance, term plans are the most affordable. As they are a pure protection plan, the premium is cheap. That’s not all, you can choose a term plan that best suits you. Take a look:
a. Level Term Insurance
A plan where the coverage offered to the insured person remains the same throughout the tenure of the plan.
b. Increasing Term Insurance
Increasing Term Insurance is a reliable choice if you want the coverage to increase each year along with your growing needs.
c. Decreasing Term Insurance
The coverage decreases each year by a fixed percentage. It is a reliable choice for people whose needs and liabilities decrease as they grow old and the plan helps them cut down on unwanted high premiums.
d. Term Insurance with Return of Premium
In a term insurance plan, if the insured survives, nothing is payable. In TROP the premiums paid during the tenure are returned if the insured survives.
Wrap Up
One of the most important pillars supporting the financial base of independent contractors is term insurance. Because of its simple nature, low cost, and emphasis on risk management, it is vital for individuals who choose their own career routes. When self-employed individuals go on with their entrepreneurial spirit, including term insurance in their financial plan guarantees that their freedom will be preserved throughout their lives. Using a term insurance calculator can help you tailor the policy to your specific needs. Term insurance gives you and your loved ones more security in the face of life’s uncertainty.
