There are many benefits of being your own boss. You get to make all sorts of choices for yourself and your work. However, there are many risks and challenges of being self-employed. You may have a family to take care of and with no fixed guaranteed income, it could be challenging at times.
Also, you do not have saving schemes like the provident fund to secure future and group health plans to provide you coverage during medical emergencies. For these reasons, self-employed people must make additional efforts to protect themselves and their loved ones from life's uncertainties.
What is a Disability Insurance?
Disability insurance is an insurance cover which offers financial support in case you suffer from a physical disability. Disability for the insurance has been defined as given below:
- Loss of one or more limbs, i.e., hands, arms, feet or legs
- Loss of a sensory capacity, for example, hearing, speech and vision in one eye or both
Disability can happen due to accident or medical reasons and can be permanent or temporary. A comprehensive disability cover will cover most disabilities.
Also Read - Short term vs Long term Disability Insurance
Why Disability Insurance is Important for Self-Employed Professionals?
Disability insurance is an important safety cover for self-employed. Everything may be working fine for you, and you must be enjoying your freedom working as self-employed. However, assume that you met with an accident while returning after meeting the client. You suffered an injury in your arms and leg.
As a result, you cannot work, and your income flow is stopped. At the same time, your medical bills continue to rise, and your regular financial obligations will not wait. It is not an easy situation to face.
You can effectively manage such a situation - Disability Insurance cover. Disability Insurance can help you:
i. Secure yourself and also your loved ones
ii. It takes care of your essential expenses
iii. Since you do not have to worry about expenses, you are not stressed and can focus on recovery
iv. The premium you pay towards the plan is eligible for a tax deduction
How to Find the Right Disability Insurance for Self-Employed Professionals?
You can avail of disability insurance cover under accidental cover and critical health insurance covers. Both of these covers are available as riders and as standalone policies.
The best way to have these covers is to add them to your term life insurance cover. This way they are more manageable and you can avail of additional benefits too.
Other Important Insurance for Self-Employed Professionals
You cannot predict the future, but you can prepare yourself for unexpected life events by having different insurance as a self-employed. Below are some of the must-have insurance covers for self-employed:
a) Term Insurance Policy
It is the simplest and purest form of life insurance. In case of an unfortunate event of your death, your nominee will receive a sum assured that will secure the future of your loved ones. Being self-employed, having term insurance with additional benefits would be a better option. Look for term insurance with:
a.i) Long-Term Coverage:Online term insurance plans like iSelect Smart360 from Canara HSBC Bank of Commerce life insurance offers life cover till 99 years of age
a.ii) Regular Income Option:You and your family need a stable regular income. So, look for a term plan which gives the following options:
- Regular income after 60 to you
- Pay out of death benefit as regular income to your family
iSelect Smart360 Term Plan releases 0.1% of the base sum assured as regular income once you become 60. The income will continue till the expiry of the plan of your demise.
- Critical Illness: If you are diagnosed with a critical illness, your income will be affected. Hence look for a plan that gives you the option of no future premium if diagnosed with a critical illness.
- Accidental Death & Disability: You get an additional lump sum payment if diagnosed with critical illness or accidental total & permanent disability to take care of your immediate needs.
- Child Support Rider: You should secure your child's future under all circumstances. Look for a term insurance plan that comes with child care benefits.
b) Critical Illness Insurance
Your income will be impacted if you are diagnosed with critical illnesses like cancer, renal failure, heart attack, etc. Critical illness insurance pays you a direct lump-sum benefit that will help you pay for expenses not covered by other insurance.
Critical Illness Insurance Cover and Benefits
The medical treatment cost is high in India, and health problems can come to anyone in the family. All your family members must be covered under health insurance. Buying separate plans may be costly, and hence you should buy a family health insurance plan - it is affordable.
c.i) Short-Term Plans:These plans have a policy tenure of one year and are good if you plan to port your health insurance plan.
c.ii) Long-Term Plans:The policy tenure is between 2 to 5 years for such health insurance plans. The biggest benefit is that you don't have to worry about frequent renewal. You are eligible for discounts on the premium you need to pay. Also, you get more benefits on long-term plans.
How to Strengthen your Financial Safety as a Self-Employed Professional?
As a self-employed, you can solidify your financial safety by incorporating the below practices in your journey:
1. Have a Life Insurance
You should have all the insurance plans discussed above and ensure they are active. If you have short-term insurance plans, make sure you renew them before the existing ones are expired. Also, never fail to pay your premiums on time.
2. Build a Contingency Fund
As you do not have a regular and guaranteed income, it is of utmost importance that you have a contingency fund for unexpected events like medical emergencies or revenue delays from a business. You should have contingency funds 6 to 12 times your monthly expenses.
3. Have a Life Policy Under MWP
Ensure that in case of an unfortunate event, the benefits of term insurance go only to your wife and children. You can assign life insurance policies under the Married Women's Property (MWP) Act. Under this Act, only your wife and children are entitled to the sum assured in case of your death. The policy under MWP cannot be attached to lender payments by courts.
4. Pool Money Under a Trust for Children
Have the provision of trust if you need to ensure the financial safety of your child or a dependent relative. One goal you cannot compromise upon is your child's future, and hence you should pool money for your children under a trust. Until your children mature enough to manage wealth, the trust will ensure they receive the money as and when needed if you are not around.
Another way to offer this financial safety is to have a term plan which pays death benefits as a regular income, instead of a lump sum.
A self-employed person is a multitasker - from managing daily business to generating income for house expenses and funds for future contingencies there is a lot a self-employed person does. If you are an entrepreneur working individually or at a small scale, the challenges are even more.
You are on your own on many things, including personal safety. You have so much on your plate, you should work to protect yourself by making minimal yet effective efforts.Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.