Purchases of term insurance among self-employed individuals have surged by 50%, driven by tailored plans and the growing gig economy. With the rise of young entrepreneurs, the demand for flexible insurance options is reaching new heights, according to a report by Policybazaar, an insurance marketplace.
A person is considered self-employed if he or she works with his or her own set-up, or employs people for own ventures. The definition of self-employment is wide: It ranges from a tea stall to working in a farm to practising doctors. Under this category, there are two types: Those who are account workers or employers and those who are helpers in household enterprises. The latter type is basically unpaid work undertaken in one’s own economic activities.
Tailored products drive growth in term insurance
“The uptake of term insurance among self-employed individuals is a clear indicator of rising financial awareness. With flexible, specialised plans now available, it’s easier for business owners and freelancers to secure their families’ financial futures,” Rhishabh Garg, Head of Term Insurance at Policybazaar said.
The growth is largely due to term plans that don’t require traditional income documentation. Here’s a closer look at what’s fuelling this rise:
— The self-employed segment has seen a 50% year-on-year growth, with 70% of sales coming from plans tailored for them.
— These plans have simplified the process by removing the need for Income Tax Returns (ITR) or salary proofs, making it easier for self-employed individuals to access insurance.
— Insurers now use digital metrics like credit or loan history and even the Insured Declared Value (IDV) of vehicles to gauge an applicant’s financial stability.
Term insurance plans for self-employed:
Plan Name: Bajaj Allianz Life iSecure
Sum Assured: Rs 50 lakh
Premium paid monthly: Rs 1,035
Sum Assured: Rs 1 crore
Premium paid monthly: Rs 1,778
Plan Name: MRS Select Self Employed (TATA)
Sum Assured: Rs 49.99 lakh
Premium paid monthly: Rs 1,107
Sum Assured: Rs 1 crore
Premium paid monthly: Not available
Plan Name: Smart Secure Plus (Max Life)
Sum Assured: Rs 50 lakh
Premium paid monthly: Rs 995
Sum Assured: Rs 1 crore
Premium paid monthly: Rs 1,595
Plan Name: Click 2 Protect Super (HDFC Life)
Sum Assured: Rs 50 lakh
Premium paid monthly: Rs 1,001
Sum Assured: Rs 1 crore
Premium paid monthly: Rs 1,735
Plan Name: iTerm Prime (Bandhan)
Sum Assured: Rs 50 lakh
Premium paid monthly: Rs 670
Sum Assured: Rs 1 crore
Premium paid monthly: Not available
These Premium paid monthlys are as of October 10, 2024, according to Policybazaar.com. They are subject to change.
Income distribution and insurance cover
When it comes to choosing the right cover, self-employed individuals are increasingly opting for life insurance equivalent to ten times their annual income. For example:
— Those with an income between Rs 3-5 lakh often choose a cover of around Rs 39 lakh.
— Higher earners with an income exceeding Rs 10 lakh tend to select policies that offer coverage of about Rs 1 crore.
74% of term insurance buyers in the self-employed category are aged between 27 and 38. This younger demographic’s familiarity with digital platforms and financial literacy tools is playing a key role in their proactive approach to securing their financial futures., according to Policybazaar.
Gender distribution in insurance purchases
Although self-employed males still dominate the market, making up 84% of policyholders, women are beginning to make strides in this area. As more women enter the business world and take up entrepreneurship, their participation in term insurance purchases is expected to rise.
Top markets for self-employed term insurance
Mumbai leads the way in term insurance purchases among the self-employed, followed by cities like Delhi, Chennai, Lucknow, Bangalore, and Hyderabad.
What is term insurance?
Term insurance is a type of life insurance policy that provides coverage for a specific period or “term.” If the insured person passes away during this term, the policy pays a death benefit to the nominated beneficiaries. The key feature of term insurance is that it offers a high level of coverage at relatively low premiums compared to other types of life insurance.
For instance, HDFC Life Click 2 Protect Life plan:
Sum assured: The minimum sum assured starts at Rs 50 lakh, with no upper limit, depending on the policyholder’s eligibility, age, and premium payment capacity. It’s common for policyholders to choose coverage of Rs 1 crore or more for better financial protection.
Premium amount: For a 30-year-old non-smoker opting for a sum assured of Rs 1 crore, the premium could start from around Rs 8,000 to Rs 10,000 per year, depending on factors like the policyholder’s age, health, term of the policy, and additional riders chosen.
Unlike whole-life or endowment policies, term insurance has no savings or investment component. If the policyholder survives the term of the policy, there is no payout or return on the premiums paid. The primary purpose of term insurance is to provide financial protection to the policyholder’s dependents in case of their untimely demise.
Rise of the self-employed workforce in India
The latest Periodic Labour Force Survey (PLFS) for 2022-23, published last November, points at a striking feature of India’s employment landscape — its growing self-employed workforce. According to the survey, the share of self-employed individuals in India has increased from 52% in 2018-2019 to 57% in 2022-2023.
