Why Self-Employed People Need Term Insurance? 5 Key Reasons

Written by : Knowledge Centre Team

2026-02-10

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6 minutes read

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Are you running a small or medium-sized business? Your recent experience in the COVID environment must have impacted your priorities to some extent. The truth is that such times are part of life in small and medium-sized businesses.

However, that does not mean your family and personal life should remain unprotected from the financial consequences of natural events. Life insurance, especially term insurance plans, can safeguard your family financially and help them achieve their goals even in your absence.

In fact, being self-employed makes it all the more important for you to have a term life cover as soon as possible. Let’s understand what term insurance is exactly and five reasons why, as a self-employed person, you must invest in it.

Key Takeaways

Self-employed professionals often lack employer-provided benefits and must plan for their own financial protection.
Term insurance offers peace of mind by covering major risks, such as death, illness, or disability.
Premium waiver options help maintain coverage even when the policyholder is unable to pay future premiums.
Terminal illness coverage ensures early claim payout for advanced medical care during tough times.
A regular income payout supports the monthly household needs of the policyholder’s beneficiaries after their unfortunate demise

What Do You Understand by Term Insurance for Self-employed Persons?

Term insurance policy is a type of life insurance that provides financial protection for a specific period. If the insured person unfortunately passes away during the policy term, the nominee receives the sum assured. There is no maturity benefit, which makes term plans highly affordable and accessible.

Self-employed individuals are their own bosses. They enjoy flexibility and independence, but they also shoulder all financial responsibilities on their own. Unlike salaried employees, they do not have the security of a fixed income or employer-provided benefits, such as life insurance or health insurance. This is where term insurance becomes crucial for them.

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Why Term Insurance is Essential for the Self-employed?

A self-employed person may run a business, offer professional services, or freelance across industries. Their income may vary from month to month. In such cases, a term plan provides peace of mind. It ensures that their family will not suffer financial hardship in the event of any unfortunate circumstance.

Without a term plan, the financial future of dependents can become uncertain. Loans, rents, tuition fees, and day-to-day expenses can become unmanageable. Term insurance covers these liabilities and provides peace of mind to the family. Likewise, the following are five essential reasons why self-employed individuals need a term plan:

Lack of Employer Benefits: Unlike the employees in the organised sector, you lack employer benefits like the employee provident fund, health and life insurance covers. As the employer, you need to spend some money to secure some of these benefits for your family.

You also need to invest some money regularly towards your retirement and other financial goals, including children’s education and marriage. Thus, a term insurance plan is necessary to take care of these goals in case you cannot complete the investments due to a contingency.
Business Ownership Transfer Costs: You should consider the cost of transferring ownership to the next generation in case anything happens to you or you cannot actively participate in the business. The new generation may take some time to catch up with the business needs and may need money to continue operations.

This would also include any loans and financial obligations you normally have in your business. In case you have taken a loan for branding and expansion activities of your business, your term life insurance should cover that too.

Tax Benefits: Even as a self-employed taxpayer, you can use the tax-saving schemes to reduce your personal income tax. The term insurance plan also provides you with tax relief under Section 80C of the Income Tax Act.

The term insurance premium, along with other investments, can reduce your taxable income in a financial year by up to ₹1.5 lakh under Section 80C.
Life Cover with a Single Premium: The best part of a term insurance plan is that you can get 30 years' cover with a one-time premium payment. That means your family will remain financially safe from contingencies, regardless of the business’s performance and market conditions.

You can secure a term life cover of ₹1 crore with a premium of about ₹1.5 lakh at the age of 30. Pricing like this is what makes term insurance so effective for the financial safety of your family.

Financial Support in case of Disability and Terminal Illnesses: Term life insurance has multiple additional benefits which are useful in different scenarios. The best term insurance plans offer critical illness and accidental disability cover as well, if you think that both of these conditions could be financially devastating for a family, especially when you are self-employed.

Both the business and your family depend on your well-being to function, and critical illness and physical disabilities are two risks to your capacity.

How to Select the Best Term Insurance Cover?

The best term insurance cover should not only offer adequate life cover to your family, but it should also aim to make it convenient for them to get the benefits they deserve. For example, the Canara HSBC Life Insurance has an attractive claim settlement ratio of 99.43%^. Buying the iSelect Smart360 Term plan by Canara HSBC Life Insurance will have the following benefits:

Life Cover With in-built Terminal Illness Cover: Ensures lower premium cost, plus sufficient cover for major illnesses. This helps in managing both long-term protection and short-term financial needs without straining your budget. It is especially helpful if you are the sole breadwinner, as the funds released under this cover can help pay for expensive medical treatments, home care, or lifestyle adjustments.

Take the case of Anil, a 38-year-old freelance architect. He opted for a term plan with terminal illness benefit. A few years later, when he was diagnosed with a serious condition, the plan helped him withdraw a part of his sum assured. This helped him afford advanced medical care without depleting his savings or taking a loan.
Accidental Disability Cover with Premium Waiver: With the iSelect Smart360 Term Plan by Canara HSBC Life Insurance, you can choose to opt for additional covers for a minimal cost. You can also add a premium waiver rider. If the unfortunate were to happen and you are unable to work, the future premiums are waived off while the cover continues. This means your family stays protected without the stress of arranging funds to keep the plan active.

For instance, you can opt for an additional amount paid to you in case of accidental disability, and another add-on that waives off all future premiums if the unfortunate were to happen.
Benefit Pay-out as Regular Income: Ensure your loved ones receive a monthly income even in your absence by opting for a regular income payout option. You can also choose a lump-sum payout or a combination of part lump-sum and part regular income. This means your loved ones can address urgent needs, such as loan repayment or education fees, with the lump sum, while the regular monthly payout supports their ongoing lifestyle.

This payout method works especially well for families who rely on a single income. It helps maintain the standard of living and avoids financial disruption in the absence of the policyholder.

Conclusion

As a self-employed individual, you are the driving force behind your business and the cornerstone of your family's financial stability. You plan, earn, invest, and secure everything for your loved ones. Yet, life’s uncertainties remain outside anyone’s control. Thus, don’t wait, and buy a term insurance which helps you safeguard your family.

Plans like the iSelect Smart360 Term Plan by Canara HSBC Life Insurance are designed to meet the dynamic needs of modern self-employed professionals. From high claim settlement ratios to affordable premiums and powerful rider options, this plan helps you build a financial shield that works when it matters most.

Make a wise decision today and secure your peace of mind for tomorrow

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.