Entrepreneurship is very important for a country as it has the potential to generate wealth, create jobs, and foster innovation. If you want to make a difference in the world with an innovative idea or business concept, entrepreneurship is the way to go. Uncertainty in revenues, operational issues, and external factors make the entrepreneurial path only fit for those who can endure the journey. However, you must be adaptable and accommodating in order to deal with the uncertainties of this journey. Before you embark on this journey, be sure you have solid backup plans and adequate life insurance or choose the best investment plan.
What is Term Insurance for Entrepreneurs?
When planning for risk mitigation, consider everything that would be at risk if you were no longer present. How would your loved ones handle loans and other financial obligations in your absence? How will your children be able to pursue higher education? Would there be enough money to support your family’s lifestyle based on your income?
Term insurance is a long-term solution to provide financial security for your family. With the help of the right sum assured which you can gauge via a term insurance calculator your family can maintain the standard of living, and the children can complete their education as you planned and envisioned. Insurance is an agreement between the insurer and the insured that guarantees a set amount known as the “sum assured” that is paid to the nominee in the event of the insured person’s demise during the duration of the term. Along with the term plan, an entrepreneur can also choose the best investment plan to create wealth for his family and fulfill their business needs in their absence.
How Do I Choose Term Insurance as an Entrepreneur?
Choosing a term insurance plan or the best investment plan is a whole different process because the factors influencing an entrepreneur differ from those impacting others. Here are a few ways to make your decision-making process smoother.
1. Policy Term: An entrepreneur’s career is not limited by an age set by someone else. They can work as long as they feel like it and are physically fit enough. Hence, policyholders need to prioritize their long-term tenure. They can know how much they would be paying in premiums by inputting the details on the term insurance calculator.
2. Premium Payment time: Salaried individuals with adequately secure jobs can pay their premium the entire time using their salaries. Entrepreneurs do not have the luxury of a guaranteed salary or employment. The shorter the premium payment period, the better it would be for them. Although the premium for the same would be high as can be calculated using a term insurance calculator, they can pay off their premiums early and enjoy life insurance coverage for the duration of the policy.
3. Adequate Sum Assured: Calculate your liabilities, expenses, and other financial obligations. Include possible milestone-related expenses such as marriage and children’s education. Consider inflation. Use these figures to determine how much money your family will need to live comfortably. In case the term plan is not enough to fulfill these expenses, it is recommended to choose the best investment plan.
4. Health Check: Complete all medical examinations and check-ups required by the insurer at the time of application. Fill out details as accurately as possible on the application form. If the company has access to your health record and medical history, there will be no disagreements when your family seeks the death benefit. Suppressing medical history can result in a claim denial.
5. Increase Life Coverage Later: Your financial demands and family will continue to expand after you get term insurance. You will need to increase your coverage after marriage and childbirth and may need to add the best investment plan.
6. Additional Riders: Determine whether the policy provides an additional sum assured upon the diagnosis of serious illnesses or permanent disability.
Here are some of the benefits that a life insurance plan provides to business owners:
1. Protection of Family Dependents: A life insurance policy is a financial asset that protects your loved ones in your absence. The scenario may be significantly worse if you are your family’s lone breadwinner. One of the best ways to protect yourself against such eventualities is to buy a life insurance policy with a large enough sum assured. What should be the ideal sum assured can be easily gauged by the term insurance calculator. A life insurance policy can assure that if you die, your family will have a financial backup to rely on in your absence.
2. Protects against Business Liabilities: Every firm needs funds for growth and expansion. Borrowing money from a bank or other financial institution to expand a business may seem like a convenient alternative. You must ensure that you pay your debts on time. However, if you unfortunately die, your family or co-founders, if any, may be responsible for repaying the obligations. They may face significant financial strain to support themselves and pay off any corporate debts. Life insurance can help manage the risks in such unforeseen scenarios.
3. Tax benefits: A key motive to purchase a life insurance policy may be to provide financial security for your dependents but, a life insurance policy provides various tax benefits as well. The premiums you pay for life insurance are eligible for deductions from taxable income under Section 80C of the Income Tax Act of 1961, subject to the limitations. This section allows you to claim a maximum deduction of Rs.1,50,000 per year on premiums paid. These additional tax benefits may also make life insurance for business owners more appealing. If you choose the old tax system, you will be allowed to get a deduction under Section 80C of the Income Tax Act of 1961, as the new tax regime does not allow for such deductions. Apart from the tax savings on the premium you pay, the sum assured that your nominee receives in your absence is also tax-free under Section 10 (10D) of the Income Tax Act of 1961, subject to the limitations indicated therein.
So we are saying,
Entrepreneurship is undoubtedly an exciting journey because you are on a quest to provide your product or service to the world. You are working continuously to make your goal a reality, change people’s lives, revolutionize the local economy, and earn money for yourself and other stakeholders. However, when sailing on rough waters, you must keep sight of the coast and prepare for unforeseen circumstances. Insurance is the best-known risk mitigation technique for ensuring that your depend
ents are not harmed at any moment.
