- Unlike corporate employees, self-employed professionals do not have company provided life insurance covers
- Small businesspersons often put their personal finances on the line for business expenses
- A loan availed for business expansion needs to be repaid, even in the absence of the person
- A term insurance policy offers a safety net to safeguard the financial interests of the family
One of the major reasons pushing individuals towards self-employment is the desire to live life on one’s own terms. While it brings about a sense of ownership, and responsibility, and possibly greater finances, it is also a risky venture when contrasted with the assurance of a regular, fixed monthly income.
Unlike salaried individuals, self-employed businessperson don’t have a fixed income. Setting up the business or its expansion could have required a loan, which would need to be repaid.
In your absence, paying off these loans can prove to be challenging for your family. With a life insurance policy, especially term insurance, you will be able to secure your family’s financial future even if you are no longer with them.
1. Unstable income sources and no back-up plan
Employment brings with it a sense of financial security. While some professions have target-based financial rewards, most employers offer a fixed salary along with a variable bonus. You know the minimum amount that will be deposited in your bank account at the end of the month, allowing you to plan your expenditure and savings.
But if you’re self-employed, the story changes; freelancers have fluctuating sources of income, causing their earnings to fluctuate wildly from one month to the next.
While business owners can deploy certain means for generating additional revenue, there’s no guaranteed amount they will earn at the end of a month. Erratic cash flows can also deplete or exhaust savings. This can even lead to erosion of money kept aside for meeting family expenses and long-term goals. Unlike corporate employees, they do not have company provided insurance cover either.
With exhausted savings, and bills to be paid, including debt, a term insurance plan will help your kin service these debts in your absence.
2. Working Capital Loans
Medium and small businesses are the engine that drives the country. They constitute 80% of the total industry and contribute 8% to the GDP. However, most small businesses are concerned about the lack of working capital. Challenges such as inability to recover outstanding dues in time lead several companies towards deficits.
To augment the loss in revenue, or to comply with the latest regulations, you may have to seek financial assistance in the form of working capital loans, immediately exposing you to additional risks. A term insurance plan can mitigate the risk of financial burden levied on your family, in your absence.
3. Loans for expansion
Setting up a business requires immediate capital. Upon successful delivery of goods or services, the next step of any business is to expand. Expanding your business also calls for more financial resources, compelling you to borrow.
Term insurance policies with adequate coverage can aid in the repayment plan of the loan, when you’re not there. The burden of paying back the loan is slightly lifted, while also having an easily implementable plan in case a tragedy befalls.
4. Loss of key employee.
A business might face financial strain due to the sudden demise of its key employee. A term insurance can be bought as ‘keyman insurance’ by a company. The purpose of this keyman insurance is to cover the life of key functionaries in the organization, such as its owner, CEO, key project manager or any employee the company considers to be an integral part of its functioning. In the event of his/ her sudden death, the company can recoup the financial loss using the sum assured. This cover is intended to help the company regain from the stumble and continue in a sustainable manner.
5. Unemployed/Non-earning spouse
Term insurance is most useful in case your spouse is unemployed, or does not earn substantial income to maintain the existing standard of living. It gets compounded further, if there are business loans to be paid, or debt to be serviced.
Instead of shifting the onus of payment on to grieving kin, a term insurance plan provides an easy and practical way to service those debts, relieving your family members of the burden.
Why opt for Term Plans?
While challenges to self-employed individuals are aplenty, the barriers to opting for a term insurance plan are few:
There are a host of life insurance plans to choose from, each with varying degrees of complexity. A Term plan, by definition, is straightforward — it provides coverage to the beneficiary in case tragedy befalls the policy holder during the plan term.
The monthly premium for a term plan is quite low. The premium depends on one’s age, gender, and medical history. With higher age and unhealthy lifestyle, come higher premiums. Nonetheless, entrepreneurs looking for cost-effective means to insure their family can opt for term insurance coverage.
Term plans, therefore, are ideal for self-employed individuals, as they’re cost-effective, hassle-free, and may even promise return of the ‘investment’. In addition, it covers the policy holder against uncertainties and sufficiently addresses the needs of the dependents.
Secure your family’s future with affordable term plans from Exide Life Insurance.