May 21, 2024

Why is a term plan a must for self-employed individuals?

Do you run a small or medium-sized business? Your previous COVID experience must have had some impact on your priorities. The truth is that such situations are common in small and medium-sized organizations.

However, this does not imply that your family and personal lives should be unprotected from the financial implications of catastrophic events. Life insurance, particularly term insurance plans, can provide financial security for your family and assist them in achieving their goals even while you are not around. In fact, being self-employed makes it even more vital for you to obtain term life insurance as soon as possible. Here are the top reasons why:


  1. Lack of employer benefits: Unlike employees in the organized sector, you do not receive employment benefits such as employee provident fund or health and life insurance coverage. As an employer, you must spend some money to provide some of these benefits for your family. You should also make regular investments for your retirement & other financial goals, such as your children’s schooling & marriage. As a result, a term insurance plan is required to cover these ambitions in the event that you are unable to complete the investments due to a contingency.


  1. Business Ownership Transfer Costs: You should evaluate the expense of passing ownership to the next generation in the event that you die or are unable to actively participate in the firm. The new generation may take some time to catch up with corporate demands and may require funding to continue operations. This would also include any of the loans or financial liabilities you currently have in your firm. If you took out a loan to fund your business’s branding and expansion, your term life insurance should cover it as well.


  1. Tax benefits: Even if you are self-employed, you can use tax-saving plans to lower your personal income tax obligation. The term plan plan also offers tax breaks under Section 80C of the Income Tax Act. Term insurance premiums, combined with other investments, can reduce your taxable net income by up to Rs. 1.5 lakhs each year.


  1. Life coverage with a single premium: The best thing about term insurance is that you can get 30 years of coverage with just one payment. That implies your family will be financially secure, independent of business performance or market conditions. At the age of 30, you can buy a term life insurance policy for Rs. 1 crore with a premium of around Rs. 1.5 lakh. This type of pricing is what makes term insurance so efficient for protecting your family’s finances.


  1. Financial Support for Disability and Terminal Illnesses: Term life insurance provides numerous additional benefits that are valuable in a variety of situations. The best-term insurance plans also cover critical sickness and accidental incapacity. If you think about it, each of these situations might be financially disastrous for a family, especially if you are self-employed.


  1. Dependent spouse: If a self-employed person has a dependent spouse, purchasing term insurance is even more vital. Or if the spouse does not have a significant source of income to support their quality of life during difficult times. A solid term insurance plan with enough financial coverage helps to provide a stress-free lifestyle, which can contribute to business success.


How do you choose the best term insurance for self-employed individuals?

Choosing the most suitable term insurance coverage, whether it is for 50 lakh or 2 crore term insurance for self-employed people, necessitates careful evaluation of numerous criteria. Here are some suggestions to help you select the best term insurance plan:


  1. Determine the insurance coverage amount: The first step is to figure out how much coverage you’ll need, whether it is 50 lakh or 2 crore term insurance. Think about your financial commitments, such as outstanding loans, mortgages, and future needs like children’s school.


  1. Choose the term insurance policy term: Choose a policy term that is consistent with your financial commitments. For example, if you have a 20-year home loan, think about getting a 20-year term insurance policy.


  1. Read the policy document carefully: Read the policy paper carefully and make sure you understand the terms and conditions. Check your policy to see what is and is not covered, as well as any exclusions or limitations.


  1. Add Riders as Needed: Consider adding riders to your policy to increase coverage. Riders, such as accidental death benefits or premium waivers, can give further protection.


  1. Consult a financial advisor: You must connect with a life insurance agent or financial advisor to evaluate the right policy for your financial goals and objectives. Overall, selecting the best term insurance policy for self-employed individuals necessitates careful consideration of your financial requirements, as well as an awareness of the policy terms and conditions. Consult a financial expert to make an informed decision. 


Features of Term Insurance for Self-employed Individuals

Term insurance policies for self-employed individuals may include several features that differ depending on the insurance provider. Here are some typical features of term insurance for self-employed people:


  1. Death Benefit: The death benefit is the main aspect of term insurance. For example, if you have chosen the 2 crore term insurance at the time of choosing the policy, the beneficiaries will receive a lump-sum payment in accordance with the policy’s terms and conditions.


  1. Flexibility: Term insurance products may allow you to choose the policy term and quantity of coverage. This enables self-employed persons to tailor their coverage to fit their financial responsibilities.


  1. Convertibility: Some term insurance products allow you to switch to a permanent life insurance plan, such as whole life insurance. This can be useful if the policyholder’s financial status changes and they wish to maintain their coverage.


  1. Accelerated Death Benefit: This provision enables policyholders to get a portion of their death benefit if they are diagnosed with a terminal disease. The accelerated death benefit might aid with medical expenditures and financial support in the policyholder’s final days.


  1. Waiver of Premium: This feature enables the policyholder to forgo premium payments if they become disabled and unable to work.


At last, 

Both the business and your family rely on your health to perform, and serious sickness and physical disability are two threats to your ability. As a self-employed individual, you face a variety of obstacles, such as running a business and planning for future revenue opportunities. Unlike salaried professionals, self-employed individuals have an unstable income, their personal finances are always at stake, and if they have taken out a business loan, it must be paid even while they are absent. That is why having term insurance is essential for them to maintain themselves and their families in the event of an unexpected emergency.

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