Why Is Term Insurance Essential for Self-Employed Individuals?


Self-employed individuals have multiple tasks at hand. They often struggle to find their footing in the business, especially during the early days, and also have responsibilities managing the financial expectations of the family, etc. Therefore, a term insurance policy is important for every individual, whether salaried or self-employed, but let’s look at why its significance is even more amplified in the case of self-employed individuals.

Do you know if you are eligible to get term insurance as a self-employed person? The article below lists reasons why self-employed persons should consider buying the best term insurance for their loved one’s financial security.

Reasons A Self-Employed Should Buy A Term Plan

Below are the reasons why a term insurance policy is regarded as one of the essential tools for financial safety, especially for self-employed individuals.

  1. Irregular flow of income

Self-employed individuals, whether entrepreneurs or freelancers, may not have a steady flow of income at all times. It may vary in different months, making their savings and investments inconsistent.

They may even face a cash crunch at times; thus, they need to make provisions for securing their family’s future during times of uncertainty. A term insurance plan serves this purchase in the individual’s absence.

  • Covers up for employer-sponsored term insurance

Salaried individuals usually enjoy employer-funded group insurance term plans. The employer pays the premiums for such plans, and the employee enjoys the benefits. However, in the case of self-employed individuals, there are no such perks, and the responsibility of securing the future of their loved ones falls solely on them.

  • Take care of additional business liabilities

An entrepreneur can face different business liabilities at various stages, either in the initial stages or later. These debts or liabilities can pose a huge concern to their family if a tragedy strikes. Similar to other life insurance policies, a term insurance policy can reduce the financial burden on the family by helping them repay these loans in the insured’s absence.

  • Provides multiple premium payment options

As mentioned earlier, as a self-employed, there is no stable income. Thus, one may be in a tricky situation if they are obliged to pay monthly or regular premiums. A term plan typically offers various premium payment frequencies, including monthly, quarterly, half-yearly, annual or single premium options.

A self-employed individual may choose a single premium option, wherein one can enjoy the policy’s benefits by paying a single upfront premium when purchasing the term insurance policy. This would mean the family stays protected throughout the policy tenure, without worrying about regular premium payments.

  • Offers tax benefits

A self-employed individual can invest in tax-saving instruments to avail of tax benefits and lessen tax liability. Term insurance tax benefit is one of the key reasons for purchasing this popular type of life insurance policy. Premiums paid for term insurance qualify for tax benefits under Section 80C of the Income Tax Act of 1961.

One can invest up to ₹1.5 lakhs in a financial year on any premiums paid for a term insurance policy. Additionally, if the policyholder opts for a health rider, including the critical illness rider, the rider premium is also eligible for deduction under Section 80D of the Income Tax Act, 1961.

  • Avail financial assistance in case of disability or critical illness

Term insurance for self-employed offers several benefits, one among which is the provision to add riders for critical illness or accidental disability at the time of purchasing the policy at a nominal additional premium.

For example, if a person opts for a critical illness rider under a Tata Term Insurance Plan, upon the diagnosis of the critical illness (covered under the policy) will receive a specified sum assured.

Moreover, if the policyholder does not survive the policy term, the appointed nominee will receive the death benefit. A term insurance policy thus can provide financial security to the policyholder and their dependents.


A self-employed individual may face many challenges in running and growing the business, keeping a steady flow of income to support the family and finding various avenues to save and invest. Term insurance for self-employed individuals ensures a one-stop solution to provide financial protection to their families and loved ones.

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