For self-employed who take full responsibility of financial security, term insurance is a practical way to protect their family’s future and it is important to choose a right plan.
Being self-employed gives you freedom. It also puts the full responsibility of financial security on you. Without employer-provided group life cover or a fixed monthly salary, no safety net exists for your family if something happens to you.
This is the reality for most Indian workers. According to the PLFS Annual Report 2025 by MoSPI, 56.2% of India’s workers are self-employed. That means more than half the workforce has no employer to arrange life cover. For them, term insurance is a practical way to protect their family’s future.
The real question is how to choose a plan that suits an uneven income. Let’s take a look at how to do that.
Why is Term Insurance Important for Self-Employed Professionals
A salaried employee has a steady income, a provident fund and sometimes employer-provided cover. Self-employed professionals are a varied group. A practising doctor or lawyer may earn well and have a loyal client base. A shop owner, freelancer or small trader may see income change with the season or the market.
Even high earners carry risks that salaried people do not. Business loan repayments, supplier payments and employee salaries depend entirely on them. Their income also stops if they cannot work. This is why term insurance matters across the self-employed, though the cover amount and premium plan may differ.
If that individual passes away, the family has to handle household and business debts. Term insurance helps by paying a death benefit to the nominee if the life assured passes away during the policy term. The family can use this amount to meet daily expenses, repay loans or keep the business running.
Key Steps to Securing the Right Policy
Follow the steps below to evaluate and secure the right term insurance for self-employed individuals -
Step 1. Decide How Much Cover You Need
The sum assured is the most important point to focus on. A common rule of thumb is choosing a cover of 10 to 15 times your annual income.
For a more accurate estimate, add up the following:
· Outstanding home, vehicle and business loans
· Your family's living costs for the coming years
· Future goals such as children's education
· Funds the business may need to continue or close in an orderly way
Note: Subtract your existing savings and any other life cover from this total. If your earnings vary, use your average income over the last three years rather than your best year. An online term insurance calculator can help you check the number.
Step 2. Match the Policy Term to Your Working Years
Most self-employed professionals tend to work until they are over 60. For this reason, it may not be prudent to choose a term plan that ends earlier, since you may need cover beyond that period. Choose a term plan with a coverage period that lasts as long as the family needs your income and debts remain outstanding.
Some plans also offer a whole-of-life option, which covers you even when you reach 99 or 100 years. This type of policy suits individuals who plan to work well into old age.
Step 3. Select the Proper Type of Term Plan
The various types of term plans are as follows –
· Level term - The sum assured is fixed during the policy period.
· Increasing term - The sum assured increases every year by a fixed amount.
· Decreasing term - The sum assured decreases every year and is mainly tied to loans such as a home and business loan.
· Return of premium term - The premium paid is returned if the individual survives the term but this option costs more than a regular plan.
Step 4. Look at Riders and Additional Benefits
Riders are optional covers that you can add by paying a small extra premium. A critical illness benefit can be useful for self-employed people. Accidental death and disablement cover adds protection against accidents. Read what each rider covers, what it excludes and how much it adds to the premium before you decide.
Step 5. Check Premium Flexibility
If your income is uneven, choose a premium payment option you can sustain. Term policies usually let you pay for the entire term, for a limited period, or as a single lump sum. You can pay monthly, quarterly, half-yearly or annually. The limited pay option lets you finish payments sooner while your cover continues for the full term. Missing payments can cause the policy to lapse, so pick a schedule you can manage.
Step 6. Compare Claim Settlement Ratio and Claim Support
The claim settlement ratio shows the percentage of claims an insurer has settled out of those received. A higher ratio is a good sign but it should not be the only factor. Also look at the claim process, the time taken to settle and the ease of reaching support. Insurers publish claims data in their public disclosure and IRDAI's annual report carries industry-wide figures.
What are the Tax Benefits of Term Insurance?
As per prevailing income tax laws, premiums paid can qualify for a deduction of up to ₹1.5 lakh a year under the old tax regime. This is within the limits that apply to the premium as a percentage of the sum assured. The death benefit is generally tax free for the nominee, subject to conditions. Consult a tax adviser before claiming any benefit.
Conclusion
Being self-employed means you are your own safety net. A good term plan keeps your family protected even when your income is uncertain. Start by working out the right cover, then match the term to your working years. Add riders only where they fit your needs. You can explore term plans for self-employed professionals at Bajaj Life Insurance, with flexible premium options to choose from. Compare your options, keep your documents ready, and get covered today so your family never has to carry your debts.
(The views and opinions expressed in this guest article are solely those of the author and do not necessarily reflect the views of Eastern Mirror)