Term insurance, in the case of self-employed, is one of the life insurance types that provides coverage throughout the policy tenure. It offers financial security to the loved ones of the insured in case of his/ her unfortunate death during this tenure. A self-employed person has to face many challenges, such as dealing with losses, making payments for salaries and bills, bearing expenses, etc. Here, a term plan comes into existence.
Let us have a look at the features of term insurance due to which self-employed individuals should consider buying it:
- Death Benefits
In case the policyholder, i.e., business owner, dies, a term plan offers death benefits, which will help his/ her family members fulfil their financial needs.
- Customisable
The term plans are customisable as per requirements, which means the sum assured, policy tenure, and any other factors can be customised.
- Terminal Illness
In case the policyholder gets diagnosed with a terminal illness, the sum assured gets paid in advance.
- Accidental Death Benefits
Where an accidental death of the policyholder happens, an additional amount is paid to his/ her nominee to cater for the financial needs.
- Waiver of Premium
In case a policyholder suffers from a critical illness or disability due to which he/ she will not be able to pay a premium, the remaining premium gets waived.
Steps to Buy a Term Insurance for Self-Employed
Provided are the steps to buy a term insurance plan in case of a self-employed:
- Open the term insurance form.
- Fill out some details such as contact details, name, date of birth, and gender.
- Click the tab “Check your Premium”.
- Fill out the answers to some questions like type of occupation, educational qualification, annual income, smoking habits, etc.
- After this, a list of available term insurance plans will appear.
- Select a plan suitable for business owners and make payments.
Documents Required to Buy Term Plan for Self-Employed Individuals
- ID and Address Proof:
- Aadhar Card
- Driving License
- Income Tax Return
- Job Card issued by NREGA
- Form 16
- Income Proof:
- Income Tax Returns for the last 2 years not filed in the same year, along with the computation of income
- In case the income calculation is not available, submit the ITR for the last 3 years.
- Form 26 AS
- A CA-certified audited profit and loss Statements along with balance sheets for the last two years, certified by a chartered accountant.
- Passport sized photographs
- Documents related to health conditions and pre-existing illness
- PAN Card or Form 60
How to Choose a Perfect Term Insurance for Self-Employed Individuals?
One should consider the mentioned points in mind while choosing a perfect term plan in the case of self-employed individuals:
- Adequate Sum Assured
The sum assured should be equal to the unsettled liabilities, loans, debts, and expenses that would be required to maintain your present lifestyle and fulfil life goals such as children’s education or marriage and your retirement.
- Policy Tenure
Being self-employed, always opt for a plan that covers you till 80-85.
- Premium Payment Term
The self-employed individual has to pay off all the premiums first by using the limited premium payment term to pay for the complete tenure within a few years.
- Medical Examination
The insured is required to take a medical examination as per the insurance company policy. This way, the company gets to know the health condition of the insured, i.e. existing ailments, if any.
- Policy Documents
Go through the insurance policy document to ensure that you know the terms and conditions of the policy to avoid any confusion in future.
- Additional Riders
Look for additional riders that help enhance the coverage of the base plan at nominal premiums.
Why is Term Insurance Considered to be Important for Self-Employed?
Provided below are the reasons why term insurance is considered to be essential for self-employed individuals:
- One-shot premium payment option
Making a regular premium payment might be demanding for a self-employed individual due to a non-steady flow of income. But you can opt to make premium payments in one go at the time of purchasing the term plan. This will result in receiving the term plan benefits along with the coverage till the end of the policy tenure.
- Business Liabilities
As we know, self-employed individuals have to manage business-related debts and liabilities as salaried individuals do. At the initial stage, when your business has liabilities in the context of loans raised for procuring raw materials, etc., it becomes essential to buy a term plan for your family members. It helpsdeal with the financial crisis that may arise in your absence and not burden them with the load of loans.
- Financial Hardships in the informal sector
As we know, the informal sectors are pretty vulnerable to market-related variations that occur in the economy. This means in case of an unfortunate death of the self-employed business owner, the debt and liabilities become the responsibilities of the family members. Hence, the sum assured received from the term insurance will help to repay the loans availed by business owners.
- May not have an employer-sponsored plan
There are no benefits like insurance sponsored by employers, unlike in the formal sector. Hence, the whole responsibility to take care of loved ones in any unfortunate circumstances lies on you, making the importance of term insurance in your life.
- Financial assistance
With term insurance, one can opt for some benefits, such as additional riders in case of critical illness and disability, at a reasonable premium at the time of purchasing the policy.
Conclusion
A self-employed individual has to face a lot of challenges, such as sudden losses, managing expenses, salaries, bills, etc. A term insurance plan helps you focus entirely on your business as it takes care of the financial future of your family in case of any life uncertainties. It helps get mental peace, as we know that financial support would be provided to the loved ones in your absence.
