Entrepreneurs are born risk-takers, as they say. If you’re one, then you should definitely buy term insurance. What’s the connection? Think of it like this- you can nurse your start-up towards future growth while staying worry-free about your family’s financial future. So it is vital that you insure your life with proper term insurance coverage. In this article, we will have a close look at these plans and why you need them at this stage of your life.
A Closer Look at Term Insurance
When you choose to buy term insurance, you essentially usher peace of mind into your life. Here are some of the key features of these policies:
- Term insurance plans offer pure life coverage for a fixed duration.
- The earlier you start, the lower your premium for a higher coverage amount
- You can choose the coverage depending on the premium amount that you can afford
- The insurance company pays a fixed sum assured to your nominees in case of your unfortunate demise within the policy period
- You can use online premium calculators to work out the payable amount for the coverage that you want
- There are two varieties of term insurance plans, namely regular term plans and term insurance with return of premiums. In the latter system, upon the completion of the policy period (if you outlive the same), the premium payments will be refunded to you minus GST and other charges, if applicable.
- The coverage amount should be large enough to take care of your family’s monthly costs, future goals like higher education, and repayment of liabilities if you are not around
- Term insurance policies are eligible for tax deductions under Section 80C up to Rs. 1.5 lakh on the premium payments. Your nominees will also get exemptions on the sum assured paid to them by the insurance company under Section 10 (10D) for a death claim.
All that is fine, but why do you require term insurance? Here’s taking a closer look at the key reasons below.
Why Entrepreneurs Need Term Insurance More Than Ever
Entrepreneurs and risks go hand in hand. If you’ve taken the plunge into entrepreneurship, then you should always have contingency plans in place, particularly if you have family members or dependents. Here are some of the reasons why term insurance is your best friend.
- Safeguarding Your Family- If you have family members and dependents, then would you want them to grapple with the cost of running the household (especially if you do not have a fixed income and are one of the main earners) in your unfortunate absence? Term insurance ensures that your family members receive a sum-assured payout that helps them maintain their living standards.
- Future Goals are Not Compromised- With the term insurance payout, your family can take care of future goals like the higher education of children, buying a house, family weddings, and so on, even in your absence.
- Debt Repayment- Entrepreneurs require debt for working capital, inventory, production increases, and many other reasons. However, upon their sudden demise, these liabilities may become a major source of anxiety for their families. Having term insurance means adequate financial backup for repayment of these liabilities without any unwarranted distress.
- Business Continuance- Often, if a small family business is run by an entrepreneur, it may fold up in case of their unfortunate demise all of a sudden. However, suppose there are manageable liabilities and family expenses. In that case, the spouse and other family members can use a part of the sum assured to continue running the business by taking care of necessary costs.
- Affordable Safety Net for the Future- Term insurance offers good coverage at a comparatively lower premium than many other insurance plans. It represents a more economical chance of financially securing your family without paying costly premiums you cannot afford otherwise. At the same time, the tax benefits also make the deal sweeter, helping you slash off your taxable income every year.
Now do you realize why you should buy term insurance as soon as possible? The earlier you start, the better your chances of getting a lower premium for a higher coverage amount. As an entrepreneur, term insurance should be a part of your risk-mitigation strategy, along with adequate health insurance for every member of the family, insurance for your business assets, and sufficient emergency/contingency funds to take care of at least 6-9 months of monthly expenditure and investments. Check the policy tenure with care and go for the longest one that you can find since entrepreneurs do not have any age for retirement. Depending on your income flow pattern, you can also choose the premium payment frequency smartly. You can also widen the scope of coverage by choosing helpful riders like critical illness and others, which also give you accompanying tax benefits.