Why Entrepreneurs Should Have a Term Insurance Plan?

Financial Protection For Family Amid Irregular Income

Entrepreneurs are generally the primary breadwinners of the family. Unlike salaried professionals, entrepreneurs do not have the benefit of employer-sponsored health insurance and the regular salary income, especially during the infancy stage of their business. Though income is irregular, responsibilities towards family and loved ones remain the same. Despite high financial risk, entrepreneurs need to think about their daily expenses, children’s school fees, car loan/home loan EMIs and more. Availing adequate term insurance is extremely vital for securing the financial future of their family in case of any unforeseen events.

For example, let us say Ram, who runs a retail business, has bought INR 2 Cr term insurance coverage for the next 20 years. Unfortunately, if Ram passes away during the policy term of 20 years, his family receives a death benefit of INR 2 Cr, which can help them cover living expenses, outstanding debts, his daughter’s marriage and more.

Safety Net Against Key Person Risk

In many solo venture businesses, the entrepreneur is the backbone of the business. If you are the sole owner of the business or the key partner, you take care of the operational know-how, networking and everything. If something happens to the key person, the entire business can collapse. Hence, it is important to have complete financial protection via term insurance to ensure business continuity even when the person is not around. Term insurance cover mitigates the key person risk, and the lump sum payout from the policy can help employees, partners, or successors to clear outstanding debt or for the transition to new leadership.

For example, let us say a shipping agency is run by two partners. Unfortunately, if one of them dies, his absence can impact the deliveries, clients and revenue. If he had availed a term insurance coverage of say INR 1.5 Cr, then the amount can be used by the family to manage the business debt.

Protection For Business and Family Against Debts

Entrepreneurs often rely on business loans and collateral loans to fund their business and expansion plans. In case of the untimely demise of the entrepreneur, the debt burden falls on the head of the family, specifically, when personal asset is involved. A term insurance plan can ensure that these business debts do not become a nightmare for the family in an unforeseen situation.

Buy Early for Cost-Effective Higher Coverage

Young entrepreneurs, chasing their passion, generally postpone their insurance buying plans, considering it an unnecessary cost. During the initial stage of building a startup, many entrepreneurs do not realise the importance of a term insurance plan.

When it comes to term insurance, you get higher coverage at a lower premium when you buy early in your young and healthy years. Age and health have a significant impact on the risk cover and the cost of insurance. Delaying the purchase can only cost you more when something unforeseen strikes your way.

At Jio Insurance Broking, you can check the quotes for term insurance plans for various insurers, compare the policies, and customise them as per your needs before you make the right and affordable purchase.

Tax Benefits

Term insurance offers a tax benefit and saves tax outgo. The premium paid on the term insurance plan can be claimed for tax deduction under Section 80C of the Income Tax Act, 1961.

Peace of Mind to Focus on Business Growth

When you know that your loved ones have financial protection even when you are not around, it gives you a sense of security and peace of mind. You can focus on your business growth, take risks and make bold decisions without having to worry about your family’s future. Peace of mind boosts one’s productivity.

Tips To Choose the Right Term Insurance Plan

Here are some important tips to choose the right term insurance plan that suits you and your family’s needs:

1. Assess your insurance needs by taking into consideration your current income, your family’s potential future expenses, and outstanding liabilities.
2. Decide on the adequate sum assured coverage that you need to opt for after assessing your needs. You can apply a thumb rule – 15 to 20 times your annual income to be the sum assured.
3. Decide on the policy term – usually your earning years taken into consideration.
4. Select the right insurance company – check on their service, claim settlement ratio, claim process, etc.
5. Check on the riders, such as critical illness rider, personal accident cover, disability rider, etc, that you can avail at an additional cost of premium. This can vary from insurer to insurer. Customise the plan as per your needs.
6. The most important thing is to do comparison shopping. Jio Insurance Broking allows you to compare various term insurance plans easily in no time. You can make an informed and affordable choice based on your needs.

Conclusion

To sum up, entrepreneurship itself is a risky and challenging journey. While following your challenging dream, remember to build a financial safety net for your family’s future. Term insurance is an important necessity for every entrepreneur to protect their family and business legacy. Before you think of your next business move, ask yourself a question: “What if tomorrow I'm not around? Can my family withstand the financial storm?”. If this question makes you uneasy, it’s time to secure your family with a term insurance plan.