If you are an entrepreneur, you can understand that setting up a business and running it is a big challenge, especially during the initial years. Besides this, you have to manage your household expenses, and sometimes, the income may not be sufficient to cope with all the expenditures.
Moreover, you have to focus on your business venture’s growth. Therefore, during the primary years, you will probably invest your hard-earned money towards developing the business, rather than saving it or investing in financial instruments. Apart from the household-related costs, you have to take care of the business expenses and debts as well. However, it is equally essential to secure the financial future of your loved ones.
You may not have an extra surplus to invest a significant sum in equities, mutual funds, or Unit-Linked Insurance Plans (ULIPs) among other avenues. However, you can still safeguard the financial aspirations of your family by investing in a term life insurance policy.
You may want to understand what is term insurance. Well, it is a pure form of life insurance policy that can provide you with a life cover for a particular period.
Investing in term insurance is advisable, as it offers a high sum assured at an affordable premium. In case of any untoward incident during the policy’s tenure, the insurer provides the death benefit to your nominee. Your family members can utilize this amount to maintain and clear any loans that you had left behind.
Importance of term insurance for self-employed
Here are a few reasons why you should buy a term plan:
- Your source of income is irregular
Unlike salaried individuals, you do not have a fixed income. The earnings vary depending on how well the business is doing. You end up taking a minimal sum home and invest the hard-earned amount to grow the business significantly. Hence, you may not focus on savings and investments initially, as you have set an eye on earning a considerable sum in the long run. Preparing the business for rainy days is crucial. However, it is also necessary to ensure the future financial stability of your dear ones. So, you can invest in a term insurance plan to provide adequate financial protection for your loved ones.
- You may have business-related liabilities
During the initial stage or when the business is growing, it is common to avail of bank overdrafts or business loans to fuel your venture’s expansion or for purchasing raw materials. Therefore, it becomes necessary to buy term insurance to ensure that your loved ones are not burdened with these financial obligations in case something untoward happens to you.
Factors to consider while buying term insurance
When purchasing a term plan, consider aspects, like:
- Sum assured
Do not buy a term insurance plan only for the sake of it. Ascertain the ideal sum assured, which can help you in meeting your family’s financial requirements during your absence. While determining the sum assured, ensure that you take all your liabilities, financial goals, and household expenses into account. If you have any specific monetary goals, like funding your child’s higher education or wedding, or building a respectable retirement corpus, analyze them before finalizing on the sum assured.
- Duration of the policy
When compared to a salaried individual, you will work for a longer period. A salaried individual will retire at the age of 60, whereas you can work for as long as you want. Therefore, it is advisable to opt for a term plan to protect your financial interests until the age of 85.
- Opt for suitable riders (add-ons)
Many insurers offer various riders, namely accidental death rider, accidental disability rider, terminal illness rider, critical illness rider, waiver of premium rider, and income benefit rider, among others. Based on your needs and requirements, you can consider buying these term insurance benefits. Though they will increase your premium, these add-ons offer value for money.
There are numerous term insurance benefits, but high coverage at a nominal rate makes it one of the most popular life insurance products. Ensure your family’s monetary protection so that they can live a financially independent life when you are not there to look after them.