India’s growing entrepreneurial landscape has seen a remarkable surge in self-employed professionals. According to a report by GlobalData, over 333 million individuals were self-employed in India in 2021, with the number increasing annually by 7% to 8%. From independent consultants and freelancers to business owners and service providers, self-employment offers flexibility and freedom. However, it also comes with challenges—particularly when it comes to financial protection.
One of the most overlooked financial tools among self-employed individuals is term insurance. Without the cushion of employer-sponsored benefits, self-employed individuals must take active steps to ensure that their family is financially protected in case of unforeseen events.
Why term insurance is essential for the self-employed
Self-employed individuals often have inconsistent incomes, higher personal liabilities, and greater financial responsibilities. Many lack formal documentation or do not consider themselves eligible for life insurance. This, however, is a misconception. The insurance sector has evolved, making term plans more inclusive and accessible—even for those without traditional proof of income.
Here’s why term insurance is an indispensable part of financial planning for self-employed individuals:
1. Income protection for dependants
In the unfortunate event of the policyholder’s demise, the absence of income could severely affect the financial well-being of the family. A term plan provides a lump sum payout to the nominee, replacing lost income and ensuring the continuation of household expenses, education costs, or business-related commitments.
2. Covering debts and business liabilities
Self-employed professionals often take out loans for business expansion, equipment, or working capital. If something happens to the business owner, these debts can burden the family. A term insurancepolicy can be structured to cover such liabilities, ensuring dependants are not left with the burden of repayment.
3. Protection despite lack of employer benefits
Unlike salaried employees who might receive life cover through their organisation, self-employed individuals must take the initiative to secure life protection. Modern term insurance policies are designed to bridge this gap, offering essential financial security regardless of employment type.
Easing of eligibility norms
Until a few years ago, many self-employed individuals were denied access to term plans due to documentation barriers—such as the requirement for Form 16 or structured salary slips. Fortunately, this has changed. Insurers now consider alternative financial indicators, such as income tax returns, credit scores, business turnover, GST filings, and even vehicle ownership to assess creditworthiness.
This broader approach has significantly improved life insurance penetration among the self-employed. The focus is no longer on fixed income documents but on a more holistic evaluation of financial stability and business health.
Benefits of term insurance for self-employed professionals
- Affordable premiums: Term plans are cost-effective, offering high coverage at comparatively low premiums.
- Tax benefits: Premiums paid qualify for deductions under Section 80C, and the death benefit is exempt under Section 10(10D).
- Customisable cover: Riders for accidental death, critical illness, or waiver of premium can enhance protection.
- Return of premium options: For those seeking maturity benefits, certain term plans return premiums if no claim is made during the policy term.
Types of term plans suitable for self-employed individuals
| Plan Type | Features |
| Level Term Plans | Fixed premium and sum assured throughout the policy term |
| Return of Premium Plans | Refund of total premiums if the life insured survives the term |
| Unit-Linked Insurance Plans (ULIPs) | Combines insurance with market-linked investments |
| Increasing/Decreasing Term Plans | Adjusts the sum assured as per evolving life stage needs |
These flexible plans allow self-employed individuals to choose coverage aligned with their goals and cash flow capacity.
How much cover is enough?
A common recommendation is to choose a sum assured equivalent to 10x to 20x your annual income. However, if you have multiple dependants, high-value loans, or significant future financial goals (e.g., children’s education or mortgage), it is advisable to opt for a higher coverage amount.
To estimate the ideal cover, consider the following:
- Annual household expenses
- Existing loans and liabilities
- Future education or healthcare needs
- Inflation-adjusted cost of living over the next 15–20 years
- Current savings and investments
Using a term insurance calculator can help you arrive at the right figure based on your specific profile and financial objectives.
Combining term insurance with a savings plan
While term insurance offers pure risk protection, pairing it with a savings plan can provide a dual benefit—protection for your family and wealth creation for future needs. A savings plan helps accumulate a corpus over the long term and can support life goals such as retirement, children’s higher education, or emergency funds.
You can explore insurance providers offering both term and savings plans under one platform to streamline your financial strategy.
Benefits of combining term and savings plans:
- Ensures risk coverage and financial discipline
- Provides liquidity or maturity value depending on the plan
- Helps build long-term wealth
- Offers continued tax benefits on premiums and payouts
Tips for choosing the right term insurance plan
- Assess your current and future needs: Take into account evolving responsibilities and expenses.
- Avoid underinsurance: It’s wise to opt for a higher sum assured, particularly if you have outstanding debts or financial dependants relying on your income.
- Choose flexible premium payment options: Monthly, quarterly, or annual based on cash flow.
- Compare features, not just cost: Consider claim settlement ratio, riders, and customisation options.
- Use digital tools for comparisons: A term insurance calculator can provide instant guidance on premium and sum assured.
Final thoughts
Being self-employed offers flexibility and growth, but it also demands disciplined financial planning. A term insurance policy is not a luxury—it is a necessity for anyone without corporate life cover. It ensures that your loved ones are financially secure in your absence and that your hard-earned progress is not undone by an unforeseen event.
With evolving eligibility norms and tailored products, accessing reliable term insurance is easier than ever. And by integrating it with a suitable savings plan, self-employed individuals can build a resilient, future-ready financial portfolio that protects both present and future generations.
