Not too long ago, term insurance could have been seen as a 'salaried person's product'; however, this perception is changing fast. A recent Policybazaar report revealed that a notable shift in financial year (FY) 2025 term insurance purchases by self-employed individuals jumped by around 58 per cent, far outpacing the growth seen in the salaried segment.
Most importantly, the data shows that there is a growing appetite for higher coverage amounts, particularly Rs 1 crore and above.
So, what is really driving this surge?
Typically, for many self-employed individuals, whether they run a business, freelance, or have small enterprises, life doesn't come with the cushion of employer-provided benefits. There is no corporate health coverage, no gratuity, and no company-sponsored term insurance. This makes personal protection all the more important for the self-employed.
Varun Agarwal, head of term insurance at Policybazaar.com, an online insurance marketplace, points out that term cover of Rs 1 crore and above is increasingly being viewed as a practical safeguard. "It ensures that in case of any unforeseen death, existing obligations like business loans don't become a burden on the family," he says.
Where a simple emergency can derail an unprepared family financially, such a cover begins to make sense, particularly if the person has debts, dependents, or business concerts, Agarwal states.
What is the right 'Coverage' amount?
There is no one-size-fits-all number for healthcare needs. But Agarwal suggests using a simple thumb rule: the sum assured should be around 15 to 20 times your annual income.
"Key factors to be considered are family expenses, mortgage/debts, and future goals, as they play a vital role in determining the right amount. Also, it is critical to estimate the future adjusted value of family expenses based on inflation," he states.
So if you are earning Rs 10 lakh a year, for instance, a Rs 1.5 to Rs 2 crore term plan might be more realistic than Rs 50 lakh.
Why Millennials and Gen Z are leading this shift
Interestingly, the data shows that around 88 per cent of the self-employed individuals purchasing term plans this year are from the Millennial and Gen Z age groups.
These are young professionals, entrepreneurs, freelancers, and digital creators who are more financially aware than previous generations. They are also at the stage in life where they are getting married, buying homes, starting families, and naturally thinking about financial security.
They want products that are affordable, flexible, and tailored to their unique financial flows. That is why monthly premium options are popular, as they make cash flow management easier.
What is behind this surge?
One of the most prominent reasons behind this surge is the coming of New-Age Term Plans. Many insurers now offer term plans that do not require conventional income proofs like salary slips or ITRs. This has been a game-changer for self-employed people who often have fluctuating or seasonal income.
Another attractive pull for this segment is the increasing availability of riders. Add-ons like accidental death cover, critical illness, and waiver of premium provide an extra layer of financial support during emergencies.
These have become particularly useful for individuals who don't have the fallback of corporate group policies.
Rs 1 crore Cover Gaining Pace
While the majority still lean towards policies offering Rs 50 lakh coverage (which itself has seen a 10 per cent year-on-year increase), there's a noticeable upward drift.
Rising costs of living, increased business risks, and a desire to leave behind a financial legacy are pushing many toward the Rs 1 crore above coverage amount.
The pattern suggests that the Rs 1 crore plan is no longer a psychological ceiling; it's fast becoming a new baseline.
The other encouraging trend is the rise of women term insurance buyers. As per the Policybazaar report, the share of women among self-employed term plan buyers grew from 9 per cent to 15 per cent in just one year.
This signals a broader recognition of financial autonomy and protection among women entrepreneurs and freelancers.
What Should You Keep In Mind Before Buying A Term Plan?
According to Agarwal, the following are the key factors that self-employed individuals should consider before buying a term plan:
Adequate coverage: Opting for a term plan with a cover amount ₹1 Crore and more can ensure essential financial security. It ensures that if the policyholder has financial obligations like business loans- they are covered, in case of their untimely death preventing that the burden does not fall on surviving family members.
Riders and Add-ons: Add-ons provide an extra layer of security, thus, choosing riders like accidental death benefit, critical illness and waiver of premium can help self-employed individuals in case of emergencies.
Premium Affordability and Flexibility: Ensure to choose the policy that has an affordable premium as self-employed individuals have fluctuating income. Moreover, ensure that the policy offers flexible premium payment options, such as monthly, quarterly, or annual payments so that it's convenient to pay even during months of lower income.
Claim Settlement Ratio: To ensure peace of mind, it is essential to research and choose an insurer that has a high claim settlement ratio. A high ratio indicates a company's reliability in settling claims.
The growing adoption of term plans, particularly policies over Rs 1 crore among self employed Indians is more than just a statistic as it shows a shift in how financial responsibility is approached by this segment of people.
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