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Last Updated : Jun 26, 2020 11:45 AM IST

Why is term life insurance important for the self-employed?

To shield your family from any outstanding dues, loans, or other financial constraints during unforeseen times, you need to opt for an all-round solution

Moneycontrol Brand Connect

As unprecedented and uncalled for the situation might be, COVID-19 is a reality and has come as a shock to the entire world. Almost everyone has been or is being impacted by the pandemic in some way or the other. However, among many other things, erratic job losses and pay-cuts across several sectors have hit the world economy the hardest, and India is no exception.

As per figures released by the Centre for Monitoring the Indian Economy (CMIE)[1], by April 2020 itself, over 18 million businesspersons are estimated to have lost employment (or enterprise loss). While health and well-being remain the topmost priority, the countrywide lockdown, announced in March 2020 to curb the spread of the virus is also one of the primary reasons for slowdown in the businesses and economy.

As the government wages a battle to protect the health of its citizens, the country is in the throes of an economic slowdown impacting the livelihood of many. And, if you’re someone who’s self-employed, the situation is likely to be even more difficult, since the lockdown is having severe impact on almost all supply chains and businesses, big or small.

Need for a safety net

One of the biggest lessons the COVID-19 pandemic has taught us is – “Always be prepared for the unexpected”. Moreover, the current economic situation poses a bigger risk for the self-employed as they are exposed to higher financial constraints. While self-employment does bring with it an opportunity to work on your own terms with flexible hours and a significant earning potential, there are many drawbacks as well such as: an irregular source of income, payment delays, lack of employment benefits, and uncertainty on household budget among other. Add to that, self-employed people have to manage both household and business liabilities, as income from the business pays the bills at home!

Now, whether you have just started your business or are in the process of expanding your existing set-up, chances are that you are carrying a financial burden; be it in the form of working capital loans or other loans to manage expansion of your business or personal loans. Due to this, you end up compromising on savings and investments in the short run. But, what if an untimely emergency strikes?

Insure your future

To shield your family from any outstanding dues, loans, or other financial constraints during unforeseen times, you need to opt for an all-round solution. This is where a 'term insurance plan' plays a big role as it can help you secure your family's financial future in case of an unfortunate event.

In most cases, business loans are backed by collaterals, which can jeopardise your family's lives as they could stand to lose their home, jewellery or other assets to repay those loans in your absence. Moreover, they will need to keep your business running to generate income and protect their savings for a rainy day.

A term insurance policy with adequate coverage can help your family in a major way by giving a lump sum payment which can also help your family to keep your business afloat in your absence. The payout can reduce the financial strain on your family by helping them manage their lives and business’ operating expenses or repay any existing loans etc.

Finding the right plan

While term insurance plans are a great way to protect your family, there are a few things to be kept in mind! Look for a sum assured that is adequate to cover any outstanding loans, liabilities and other expenses your family may require in your absence. A good plan should be able to maintain your family’s current lifestyle while taking care of any future life goals such as your spouse's retirement, children's education, wedding, etc. While salaried professionals usually retire at the age of 60, self-employed individuals tend to continue working for as long as they desire. Therefore, it’s preferable to select a plan that covers you till your working life.

Moreover, it’s equally important that you choose an insurance company that offers an all-encompassing policy with maximum benefits, competitive pricing, high claim settlement ratio, and industry leading customer service. Take for instance, Bajaj Allianz Life, is one of the leading private life insurance company in India, which offers term insurance plans with a wide array of benefits to insure you, and provide your loved ones a cover against financial distress during unexpected scenarios. Current claim settlement ratio of Bajaj Allianz Life is 98.02%~. They have had a claim settlement ratio of over 90% in the last 5 financial years, which speaks highly of the company’s commitment to its customers. A term insurance plan like Bajaj Allianz Life Smart Protect Goal protects your family and all your life goals including goals like launching your start-up, buying a house, child education, etc. Let’s have a deeper look into how this plan can be suited for you!

Bajaj Allianz Life Smart Protect Goal Term Insurance Plan

The offering by Bajaj Allianz Life is a pure term insurance plan which gives you a cover of Rs. 1 crore at just Rs. 18 per day*. The competitive plan with an attractive premium rate not only cushions your family members from spiralling into financial mess rising from untoward incidents but also shields your dreams. What’s even better is that it offers you the option to get back the entire premium paid (net of charges) at the time of maturity, if no claim has been made, with its ‘return of premium’ feature.

Another benefit is that you can also avail cover till the age of 99 years by paying for a limited term only. You can further customise the policy as per your requirement to widen its scope with the help of add-on covers. These add-on covers help people, especially the self-employed ones in building a comprehensive term life insurance policy

Some of the add-on covers that can be availed under this policy includes accidental death benefit, accidental total permanent disability benefit, critical illness cover and waiver of premium benefit. You can cover yourself for 55 critical illnesses by simply adding the critical illness cover to the policy! This can help protect your savings and investments from being liquidated to pay hefty hospital bills if such a situation arises.

While everyone requires a net of social security, self-employed individuals and their families might not have a sufficient security net to fall back to. In this backdrop, it’s important that you, as a self-employed individual, take a disciplined approach and have a term insurance policy with add-on covers in your financial plan to make your loved ones navigate smoothly through difficult times. An extensive plan like the one by Bajaj Allianz Life is a preferred option since it can easily fit in your family’s evolving needs during unfavourable times!

*Above illustration is considering Male aged 25 years | Non-Smoker | Life Cover Variant | Policy term (PT) – 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1, 00, 00,000 | Online Channel | Annual Premium Payment Mode | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only.


[1] https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=2020-05-05%2008:22:21&msec=776

~Individual Claim Settlement Ratio FY 19-20


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First Published on Jun 26, 2020 11:45 am

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