What is Term Insurance for Entrepreneurs?
Term Insurance for entrepreneurs is an ideal way to give financial security to the family which will ensure that the family gets a sizeable amount in case of the sad demise of the entrepreneur. It is evident to note that, unlike Employees, entrepreneurs do not get any benefits or payment in case of retirement or death. Entrepreneurs’ income is also dependent upon market forces and in addition to that entrepreneurs generally take loans from banks to run and expand their business. In the event of their death, if there is no term insurance plan, the family will not only lose its source of income but will have to deal with the repayment of loans, and other such pending payments.
Term Insurance for entrepreneurs is an agreement between the insured and the insurance company that upon payment of regular premiums by the insured, the insurance company will pay a certain amount (sum assured) to the nominee of the insured in case of death of the insured during the term of the agreement. Every entrepreneur should ensure that they have the best term insurance plan which will give security to their family.
Financial Planning as an Entrepreneur
Entrepreneurs are always dealing with various kinds of risks. Their finance must be properly planned and executed. Proper and sound financial planning can help entrepreneurs in dealing with the risks effectively. Entrepreneurs need to take into account various contingencies and plan accordingly to ensure that the lives of their family members are not jeopardized due to certain events or the crystallization of certain risks. Following are the reasons to be considered while doing financial planning and mitigating risks :
Cash is the King. As an entrepreneur, one should always keep a sufficient balance in cash or liquid asset to cover the day-to-day operating expenses as well as personal expenses. Ideally, cash and liquid assets should be sufficient to cover 5-6 months’ expenses.
Insurance against risk is non-negotiable. All the assets like buildings, Inventory, Vehicles, etc. should be adequately insured. Similarly, loans from Banks should ideally be covered by insurance. All entrepreneurs should have an adequate Term Insurance plan and also Health Insurance. Lastly, payment towards insurance is deductible under Income Tax which is an additional benefit for entrepreneurs as it will reduce their tax liabilities.
Entrepreneurs should check with their Banks if any relaxations or moratoriums are available in case the business is facing liquidity issues and other such financial problems.
Coverage under Married Women Property (MWP) Act, 1874
Under MWP Act, one can purchase a term insurance plan which cannot be attached by Banks or Creditors. So, your family will get the payment from the Insurance Company which cannot be taken away by the Banks or Creditors.
How to Choose a Term Insurance plan as an Entrepreneur?
When entrepreneurs buy Term Insurance, they make sure to keep in mind certain factors. To select the best term insurance plan following factors should be considered :
Unlike employees, entrepreneurs don’t retire. They carry on their business or profession until they are fit for work and they have a passion for their entrepreneurship. So, ideally, the policy term in the case of the term insurance plan for entrepreneurs should be longer.
Premium Payment Terms
Entrepreneurs don’t have the luxury of guaranteed income. Considering this uncertainty, it would be advisable for entrepreneurs to keep the premium payment period shorter so that they can pay the premium regularly when their business is doing well and enjoy the life cover for the policy term.
Adequate Sum Assured
The entrepreneurs must take adequate coverage of their lives. Sum Assured is the amount that the family will get in the case of the death of the policyholder. While calculating the sum assured, expenses like education and marriage of children, external liabilities, and recurring expenses must be taken into consideration. Don’t forget to factor in the inflation while arriving at the figure of the sum assured.
At the time of applying for the term insurance plan, it is advisable to undergo all the medical examinations which are prescribed by the insurance company. If the insurance company is provided with all the medical history of the insured person, there will be very less chance of disputes at the time of settlement of claims.
Increase Life Cover Later
The financial needs of families are always changing. Starting a family or the birth of a child can change the financial commitments of entrepreneurs. It is important to review the sum assured amount periodically. Certain insurance company allows the policyholders to increase their life cover subject to certain terms and conditions.
Certain insurance policies offer an additional sum assured in the event of diagnosis of certain critical illness or the case of permanent disability. Check such additional riders at the time of choosing a term insurance plan.
Child Care Benefit
Some insurance policies offer an additional sum assured till the child attains 21 years of age. This can reduce the stress of covering educational expenses as this will be an additional sum over and above the basic life cover.
Entrepreneurs constantly tackle different types of risk. Their lives must be adequately insured. Getting adequate term insurance cover is very important for entrepreneurs. It is equally important to choose the right insurance company which has various products and a good track record of claim settlement. Bharti AXA Life Insurance provides the best term insurance plans and is one of the leading and most trusted insurance companies in India. So, don’t procrastinate any longer, buy term insurance from us today!