Term Insurance for Self-Employed and Business Owners

What is Term Insurance For Self-Employed?

Term Insurance for self-employed is a type of life insurance plan that provides a large coverage amount for a specific duration called a policy term. This type of plan provides a financial benefit to the nominee/beneficiary in case of the policyholder’s unforeseen death during the policy term.

Let us understand this with an example:

Ruhaan, a healthy non-smoking 25-year old male, is a business owner with business loans and want to ensure the financial security of his family in case of his untimely demise. He purchases a term insurance for self employed with 5 Crore sum assured, that is enough to cover his loans and debts in his absence, pay for his child’s future, and take care of his family’s monthly expenses in his absence.

Note: Now that you know what Term Insurance for Self-Employed is, you should also know about what is term insurance before buying any term plan for your loved ones.

Best Term Insurance for Self-Employed and Business Owners

Here is the list of the best term insurance for self-employed people in India. These plans may offer return of premiums or no-cost benefits as per your suitability.

*Disclaimer: The list of insurers mentioned are arranged according to the alphabetical order of the name of insurance company respectively. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. The list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website www.irdai.gov.in

* You can use the term insurance calculator online to get an estimate of the premiums you would need to pay for the desired life cover.

Why Term Insurance for Self-Employed/Business Owners is Important?

Here are some of the reasons to buy term insurance for self-employed individuals:

• Option to pay premium in a single go: When you are self-employed or a business owner, you may not have a steady income flow, thus paying regular premiums may become a difficult task. However, with term insurance for self-employed, you can pay the premium once with the single term insurance premium pay option. This will help you receive benefits and get coverage under the plan till the end of policy term. This simply means your loved ones are financially secure from uncertain conditions of the market, irrespective of how your business is performing. Thus, term insurance for self-employed individuals and business owners is very beneficial.

• Business liabilities: In addition to the usual bills and expenses a salaried person deals with, self-employed individuals also have to manage business-related debts and obligations. If your business is in its starting phase, and you are facing liabilities with respect to long term loans for enlarging your business or for capital financing like securing raw materials, it’s important to have a term plan to make sure your loved ones are not burdened with such huge loans in case any unfortunate event happens.

• Experiences financial hardships in the informal sector: Sustaining a successful business is hard in today's times as the informal sector is more vulnerable to variations in the market and the economy. COVID has proved how self-employed individuals have struggled to keep their earnings consistent during lockdowns. The majority of them have turned to avail loans. In case of your unfortunate death, the responsibility of settling your loan amount/debt can come to your dependents. The sum assured amount received from a term insurance for business owners can offer your dear ones the means to repay your amounts.

• May not have employer-sponsored plan: People working in the formal sector receive various benefits such as employer-provided insurance plans or employer-sponsored pension plans, health and life insurance covers. Whereas in the case of self-employment, the whole responsibility of protecting the future of your dear ones is on you. Being an employer yourself, you need to invest some amount on a regular basis towards your retirement and other financial objectives, including marriage and children’s higher education. Term insurance for business owners can ensure that you generate a corpus for your dependents/family members for a time when you may not be with them. This helps them cover their expenses in the absence of any earnings.

• Financial assistance in case of critical illnesses or disabilities: Term insurance for self-employed individuals comes with benefits such as opting for additional coverage for critical illness and disability at a nominal extra premium while buying the policy. For example, the policyholder will get a sum assured on the 1st diagnosis of a specified critical illness under the plan, however, if the policyholder dies after getting the medical treatment, the death benefit is then paid to the nominee of the policyholder. Both these medical emergencies can financially disturb your family and budget if you are self-employed, so it’s smart to buy a term plan that provides coverage against critical illnesses.

How Term Insurance Works for Self-Employed and Business Owners?

Term insurance for business owners works the same way as it does for salaried people, you pay regular premiums, and your nominee receives the sum assured in case of your death during the policy term. The main difference lies in income documentation. Instead of salary slips, insurers may ask for ITRs, bank statements, or business financials.
For self-employed professionals, having a term plan is even more essential. Your family may not have access to a steady income or corporate benefits in your absence. A term insurance for self employed individuals ensures financial security for them to manage living expenses, debts, or business continuity.

Why Should You Buy Term Insurance for Business Owners?

Term insurance for self-employed individuals in India offers the following key features:

• Death Benefits: Term insurance for business owners offers death benefits on the policyholder's death that can help their family members care for their financial needs.

• Customisable: Term insurance for self-employed provides customisability, and thus, you can change the sum assured, policy term, and other factors to fit your financial needs.

• Terminal Illness: With these plans, you can get terminal illness coverage, under which if you are diagnosed with a terminal illness, the sum assured will be paid out in advance.

• Accidental Death Benefits: In case of an accidental death of the policyholder, an additional amount will be paid to the nominee to help take care of their financial needs.

• Premium Delay Feature: Various term insurance for self employed plans provide you with the option to delay your premium payment by 12 months. This offers you the flexibility to continue the coverage without paying the premiums for up to a year.

How to Select the Right Term Insurance for Self-Employed Individuals?

With the availability of various plans in the market, it can be very difficult to choose the right one. Let us discuss a few points that one should keep in mind while selecting and purchasing term insurance for self-employed individuals:

• Sufficient Sum Assured: It is important to select the right sum assured amount before buying a term insurance plan. The selected sum assured should be enough to cover your financial liabilities, outstanding loans, and family’s expenses and help them maintain their existing lifestyle and achieve life objectives such as marriage, children’s higher education, and retirement.

• Policy Term: If you are a self-employed individual, then your working hours can be inconsistent and sometimes more than a salaried individual. A salaried person can work till 60 years of age, whereas a self-employed person may work for another ten years. Always choose a plan that covers you till 80 or 85 years of age.

• Premium Payment Term: The option of regular payment of premium is right for the salaried section persons as they have a consistent and regular income source. On the other hand, for self-employed persons, it is important to first pay off all the premium amounts as soon as possible, i.e., by using a limited premium payment term. Using this option, one can pay for the complete policy term within a few years.

• Medical Examination: Make sure to completely fill out the proposal form with the correct details at the time of purchasing a term insurance plan. You are required to undergo the medical tests as requested by the company. This means that the company is completely aware of your health condition, and you have suppressed no facts about your pre-existing ailments or health.

• Read Policy Documents: Carefully read the policy documents to ensure that you understand each and every aspect of the policy to avoid future confusion. You can also consult your financial advisor to understand the policy details better.

• Add Required Riders: You should look at the riders available under the term insurance for self-employed and add the relevant riders to enhance the coverage of your base plan at nominal premiums.

Key Features of Term Insurance for Self-Employed Individuals

Term insurance for self employed offers a wide range of flexible features that make it well-suited for business owners and self-employed individuals. They are as follows:

Self-employed individuals can choose how they want to pay their premiums based on what suits their convenience. They can make a one-time single premium payment, regular premium payments over the policy term, or limited pay options where premiums are paid for a fixed period, but coverage continues for the entire duration of the policy.

Term insurance for business owners allows self-employed individuals to select the sum assured according to their unique needs. For example, one may opt for a ₹1 crore term plan or higher based on their income, lifestyle, and financial obligations. This flexibility ensures that the insurance coverage aligns with personal and business responsibilities.

The income replacement benefit provides financial support to the family in the form of regular monthly payouts if the policyholder passes away during the policy term. Instead of a lump sum, the nominee receives periodic payments that can help replace the lost income and maintain the family's standard of living.

If the self-employed policyholder becomes accidentally and permanently disabled and is unable to work, this rider ensures that all future premium payments are waived. The policy remains active, and the individual continues to receive coverage without the burden of premium payments during a challenging time.

The death benefit rider guarantees that the nominee will receive the full sum assured in case of the policyholder’s death during the term. Additionally, the accelerated death benefit rider allows the policyholder to receive a part of the death benefit early if they are diagnosed with a terminal illness. This can be helpful in covering medical expenses and supporting the family during critical times.

How to Buy Term Insurance for Self-employed from Policybazaar?

Following is a step-to-step guide to buy term insurance for self employed from Policybazaar:

Step 1: Visit the Term Insurance for self employed page of Policybazaar

Step 2: Fill in all the required details like name, contact details, gender, and date of birth. Then, click on ‘Check Your Premium Now’

Step 3: Answer the basic questions about the type of occupation, annual income, educational qualification, and smoking habits.

Step 4: After submitting all the information, a list of all available term insurance for self employed will be displayed

Step 5: Choose the term insurance for business owners and proceed to pay the first premium

Documents Required to Buy Term Insurance for Self-employed/Business Owner

Insurance companies have understood the limitation around the non-availability of high insurance coverage, and recently started providing covers on documents other than ITR to self-employed individuals to increase their cover.

Following is a list of important documents required to buy term insurance for business owners from Indian insurance companies:

Alternate Documents that can be used to buy term insurance for self-employed and business owner individuals are as follows:

• Car RC

• Mutual funds SIP

• Credit card limit

• Credit score/rating by credit bureaus

• As a multiple of the limit of your credit card

• As a multiple of the monthly EMI on your home loan

• As a multiple of monthly SIP in mutual funds

Asset owned calculations

• Eligibility of sum assured amounting to 50% of the shop/house owned by you with a value of up to a maximum of Rs 2 Crore

• Sum assured amounting to 1.5X the fixed deposit/portfolio statements/mutual fund statements

In fact, Policybazaar has special plans for self-employed/ business owners which give financial waivers without you having to submit any income proof.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.

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