Take a glance at a few of the points mentioned below to understand why it is important to have term insurance for self-employed individuals.
1. Unstable source of income: While salaried professionals know in advance the minimum amount that will be credited to their bank account, there is no guaranteed income for a freelancer, business owner, or any self-employed individual. The latter cannot plan their expenditure, and thus erratic cash flows often exhaust even their savings. Buying a term insurance plan provides a financial cushion to their family members and protects them from being saddled with huge loans when a tragedy befalls.
2. Working capital loans: Lack of capital often brings challenges, like the inability to pay outstanding dues, which accentuates the business deficits. To comply with the latest regulations or to cover up the loss in revenue, business owners have to hunt for financial support in the form of working capital loans, which exposes them to even additional risks. To diminish the possibility of getting their family burdened with the risk of such financial liabilities, term insurance for self-employed is highly recommended.
3. Loans to expand the business: Apart from working capital loans at the initial stage of setting up a business, one is even more compelled to borrow money to expand it. A term insurance policy with adequate financial cover slightly lifts their burden of repayment of the loan. Besides that, it also aids their family to live a stress-free life when they are not there.
4. Loss of a key employee: Opting for a term plan is vital for a business owner to keep the organization running sustainably and recover from a few struggles, if there comes any. The untimely demise of a key employee might bring financial strain to the business. A term insurance plan purchased as ‘keyman insurance’ by the organization can help it recoup such financial loss through the sum assured covered under the plan. This insurance plan is meant to cover the key officials of the company, such as the CEO, its key project manager or any employee, including the business owner.
5. Dependent spouse: It becomes even more important to purchase term insurance for self-employed individuals if they have a dependent spouse. Or if the spouse doesn’t have a substantial source of income to maintain their standard of living during unfortunate times, or even when they have to pay business loans. A good term insurance plan with adequate financial cover aids in providing a stress-free life that can lead to success in business.
The urge to live life on their terms often excites people to pursue their passion as self-employed individuals. But one needs to bear in mind that it is quite a dicey venture that comes with an irregular source of income. Business loans and other debts add up to the financial liabilities and sometimes even exhaust personal savings as well. To address the needs of the dependents, save on their doctor visits, regular medical checkups, and have a financial cover against uncertainties, it is advisable to opt for term insurance for self-employed individuals that is hassle-free, cost-effective, and even promises an adequate return on the investment.
So, if one has been doubtful about buying a term insurance plan, it is recommended that they bear the aforementioned points in mind and make a decision accordingly.
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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