An entrepreneur is responsible for managing the finances of the enterprise’s administration and employees. An entrepreneur should, therefore, have efficient financial management skills. They should know where to put the right funds and where to withhold them. As an entrepreneur then, it is vital to utilize your funds the right way by opting for a term insurance. The purpose of any insurance plan is to safeguard you against a variety of risks. As an entrepreneur, one is fraught with risks on a regular basis.
What is the meaning of term insurance?
Term insurance is a kind of insurance policy wherein the insurance company provides financial compensation to the chosen nominee/s if the policyholder passes away during the policy duration. One can ensure the validity of their policy by paying the premiums when required. Term insurance is a pure protection plan, meaning that it is concerned only with providing financial protection to your loved ones in your absence. It is not related to market-linked instruments.
Why entrepreneurs should have term insurance
Increased liabilities
When you are a businessperson responsible for running the establishment, you may end up taking on more debts than the average person. These debts may be a part of a strategic business plan aimed to foster growth or expansion for your organisation. However, if anything were to happen to you, then there is a high chance that your family may be liable to handle these debts on their own. This may put a large dent in their already precarious finances. A term insurance plan with a high sum assured can eliminate such unpleasant situations and ensure that your loved ones have funds to pay off any debts.
Unstable income
Unlike the salaried employee, an entrepreneur may not have a regular income. Their income usually depends on how well their business is performing. This is more likely to occur if the company has been newly established. This could lead to their personal savings bearing the brunt. And if anything unfortunate were to happen to them, their loved ones would be left without adequate funds. Therefore, having a term insurance plan becomes paramount; it ensures a financial cushion for the family no matter the company’s performance at the time of the policyholder’s passing away.
Long-term life cover at affordable premiums
Entrepreneurs are often very particular about where they are spending their money. A term insurance plan may also be quite suitable for an entrepreneur because their premiums are considerably low.
What’s more, there are many term insurance plans that offer coverage up to 80 to 90-year-olds. As an entrepreneur, you may be working for a longer number of years than the average employee. So, you may also need coverage that extends for the long-term duration; and if you choose the return to premium feature, then you even get the total premiums returned to you if you survive the maturity of the policy. All this at a relatively lower premium!
Points to keep in mind when purchasing term insurance as an entrepreneur
Now that you know the meaning of term insurance and why you need it, let’s take a look at the points one should keep in mind when buying it:
Opt for a high sum assured
Get a thorough understanding of your liabilities, domestic expenses, family’s financial goals, and so on, before you choose the sum assured. The sum assured should ideally be high to fulfil all these funding needs.
Use a term insurance calculator
A term calculator is an AI tool in which you can enter variables such as your age, gender, coverage requirements, sum assured, chosen term, and so on. You then receive an estimated premium. As an entrepreneur, you can utilize the term insurance calculator to plan out your finances. You will get a better awareness of how much you will have to spend to get the sum assured you want.
Consider selecting the lumpsum premium payment mode
As someone who may or may not have a regular income, paying premiums on a regular basis can become difficult. Instead, you can opt to pay your premiums in a lump sum at once, ideally when the revenues of your establishment are good, and your personal finances are stable.
Ensure to read the terms and conditions thoroughly before you sign any term insurance contract.
