Term Insurance for Self-employed

In conclusion, term insurance can be an essential part of a self-employed individual's financial plan. It provides financial protection, business continuity, and peace of mind at an affordable price.

The recent India Protection Quotient 6.0 survey jointly conducted by Axis Max Life and Kantar recorded a marked rise in the awareness and ownership of term insurance among self-employed Indians. With increase in awareness, more than 3 out of 4 self-employed individuals now own term insurance. You can read the full IPQ 6.0 Survey report for more insights about how Indians are protecting themselves and their loved ones against future uncertainties.

As per current tax rules, the premium paid towards the term insurance for the self-employed individuals is eligible to be claimed as 80C deduction for up to Rs 1.5 lakhs per annum, of the Income Tax Act, 1961. Moreover, current income tax rules also contain a provision that if the policyholder opts for a health-related rider like critical illness cover and pays extra premium for it, they can avail the tax benefits u/s 80D. These benefits are however currently available to individuals who have opted for the old tax regime.

In addition, as per current tax rules, the death benefit received is 100% tax-exempt in the hands of the policy beneficiary. This benefit is applicable irrespective of whether one has opted for the new tax regime or old tax regime.

For those who wish to pay the entire premium in one go, insurance companies give the option of single premium payment. This is especially beneficial in the case of self-employed individuals who currently have the money to fund the single premium payment, but they might witness a decrease in cash flow during certain periods. So, for business owners with variable income flow, it can be a good option to get all due premiums in one go. Such single premium options may also result in reduction of the overall premium payable for the policy in comparison to regular premium payments for the same policy.

If the self-employed policyholders are currently paying EMIs of long-term loans, like a home loan and they unfortunately pass away leaving the loan unpaid, the life cover payout from the term insurance can be used towards paying off the outstanding loan amount. This can enhance the financial protection of the family and reduce the burden on their finances.

Overall, choosing the best term insurance policy for self-employed individuals requires careful consideration of your financial obligations and understanding the policy terms and conditions. Consulting a financial advisor can help you make an informed decision.

Term insurance policies for self-employed individuals may offer several features such as flexibility, convertibility, accelerated death benefit, waiver of premium, and renewability. Therefore, it is essential to review the policy document carefully and understand the terms and conditions before purchasing a term insurance policy.

As self-employed individuals can choose from several types of term insurance plans based on their financial goals and objectives, they must review the policy document carefully and understand the terms and conditions beforehand.

In addition to the above-listed documents, applicant will also be required to submit the filled out application form, passport size colour photos and undergo a medical test/video medical test as part of the application process. The exact KYC process and documents in the case of a term plan for self-employed may vary to some extent on a case by case basis as well as from one life insurance company to another.