The total number of self-employed individuals in India stood at a whopping 333 million in 2021, according to a report by GlobalData. This number has been growing at an annual rate of 7% to 8% – but what’s driving this rapid rise? Being self-employed comes with a lot of advantages: the freedom to be your own boss, the flexibility to work on your own terms, and limitless growth potential.
However, it does come with its own set of challenges. “You do not get the same employer-sponsored benefits you would otherwise get if you were working in the formal sector. And one major benefit self-employed individuals often miss out on is life protection offered by many organisations as an employee benefit. As a result, many people end up compromising on this vital protection tool and don’t buy it for themselves. The reason? They don’t consider it necessary, or don’t think they are eligible for it – which couldn’t be farther from the truth,” says Varun Agarwal, Head – Term Insurance, Policybazaar.com.
Until a few years ago, the financial underwriting guidelines for term plans were such that one was required to submit documents like Form 16 and corporate salary slips – due to which many self-employed individuals were unable to avail term insurance plans, even if they wanted to. But, thanks to the ever-evolving insurance industry, this trend has changed in the last few years with more and more self-employed people being able to secure their financial future with a term plan. Income and ITR proofs are no longer a mandatory requirement for buying a term plan.
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What’s contributed to this change? “A lot of digital parameters are now being used to evaluate the customer’s income instead of the traditional parameters – creditworthiness through credit and loan history and purchasing power through Vehicle Ownership data. Some insurers are now using GST databases to analyse the volume of business generated by self-employed individuals. This is a much-welcomed change by the self-employed sector of India – which is clearly evident from the increasing life insurance penetration in this segment,” informs Agarwal.
Benefits of term plans for self-employed individuals
Income protection: Self-employed individuals generally rely on income generated from their own effort and in the unfortunate event of their death,
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