Most individuals aspire to be an entrepreneur or a businessman and break the vicious 9-5 monotonous jobs cycle. They seek independence in professional decision-making. This sense of ownership and responsibility often results in tremendous financial growth both for the person and business. However, this also means that as an entrepreneur, you are entering into a high-risk zone. In order to cushion the risk, mere safeguarding your business is not sufficient, you also need to financially protect yourself. This is where term insurance comes into the picture.
Here are some points that will further strengthen the argument.
Importance of Term Insurance for Businessmen
- Asymmetrical Income Source
Unlike 9-5 jobs, earnings from your business can be highly irregular. Moreover, if you have just started with your business, you put full efforts, but the returns might not be too high. Being the backbone of the business means income generated from it solely depends on the amount of effort you put in. In such a scenario, your demise can cause a severe financial setback for both your family and your business. Hence, it is crucial to financially safeguard your family and your business from any such precarious situation. You can buy a term plan to secure the family and another to secure the business.
- Business Liabilities
When you are running a business, there is always a scope for growth for which you need funds, be it for working capital or business expansion. Banks and other financial institutions can fund your business, but it means more liabilities. Moreover, entrepreneurs also never get bogged down by business liabilities because it will eventually generate profit. However, all this is only possible if you are available to run the business. In your absence, such business liabilities will not only slow down the business but also hold down your family. It is in this regard that term insurance can help you mitigate this risk, thereby shielding the finances of your family.
- Financially Dependent or Non-Earning Spouse
In today’s day and age, both the spouses earn their livelihood and contribute equally to the household expenses. Whether it is the child’s education or long-term savings, most nuclear households plan their finances, keeping all future risks in mind. However, a section of families still has a single breadwinner, especially in small family-owned businesses. So, having term insurance can go a long way to protect the financial dignity of your spouse in your absence.
- A Hassle-free Safety Net
Term plans are one of the simplest forms of insurance policies. Unlike other insurance packages, it does not have any complexity, be it related to the rate of return or coverage details. It provides a straightforward coverage to the insured and seamless pay-out to the nominee in case of the insured’s demise during the policy term.
- Economical in Nature
The most attractive component of term insurance is its low premiums. Most individuals opt for it because term insurance takes care of the basic aspect of life protection, nothing more and nothing less. Moreover, as an entrepreneur, you might have invested in other market instruments that offer high returns. In such cases, insurance plans must only be purchased for its basic role, which is life cover or death benefit.
How to buy term insurance?
With all the benefits listed out for you, the inclination to go for a term plan naturally increases. So, here is the basic procedure that you need to keep in mind before buying a term plan.
- Policy term: The term period, which ranges from 10 to 30 years forms the elementary part of term insurance. You need to be careful about choosing the term period as it also affects your premiums.
- Adequate Sum Assured: Check the sum assured to see if it suits your family’s financial needs.
- Declarations: You must be extra careful while providing personal information as any incorrect or missing information may impede the claim settlement process.
While term plans can help you in reducing the risks, choosing a suitable plan from the plethora of insurance providers can be tricky. There are also a few exceptions to what a term insurance covers, so it is always better to thoroughly read the policy document before buying any insurance plan.
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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