Term Insurance for Freelancers and Gig Workers

When you make a decision to become a freelancer or part of the Gig economy, you often are attracted by the multiple benefits associated with it. You get the freedom to choose your work, your creative side is explored fully, you have an opportunity to upskill and earn more, and there are diverse income streams. What you often ignore includes income instability, unpaid downtime, lack of employer-related benefits, and overall volatility in personal finance.

However, despite the downsides, gig workers made up more than 1% of the total active Indian workforce (at the beginning of this decade), and they will be close to 4.1% by the end of 2030. Freelancers often face issues getting credit lines and loans due to fluctuating income streams. However, term insurance can be a perfect tool that they can use for personal financial planning, attaining long-term goals, and safeguarding the future of their dependents. Let us find out more about term insurance for freelancers and gig workers.

The Need for Term Insurance for Freelancers and Gig Workers

Freelancers and gig workers do not receive employer-related benefits such as group life or health insurance. Hence, they have no security net during emergencies. Any medical emergency affecting them or their family can potentially push them to the verge of bankruptcy.

Term insurance is an excellent tool by which they can be rest assured of any worst-case scenarios. It provides an affordable way to mitigate these risks, ensuring that freelancers and their families remain financially secure even in the face of unforeseen challenges.

Benefits of Term Insurance for Freelancers and Gig Workers

Here are the most important benefits of term insurance for freelancers and gig workers:

1. Term insurance provides affordable financial protection as the premiums are quite cost-effective, and the sum assured is enough to cover the lifestyle and other expenses of the family.

2. There is financial protection for the dependents as they receive a lump sum amount in the case of an untimely demise of the policyholder.

3. There are tax benefits under Section 80C of the Income Tax Act up to ₹1,50,000 annually.

4. There are additional benefits and riders that can protect the dependents during various emergencies like accidental death or permanent disability.

Besides these points, you get complete peace of mind knowing that the family is secure even in your absence.

Challenges in Getting Term Insurance

Here are a few common challenges faced by gig workers and freelancers in getting term insurance:

1. Freelancers often lack consistent or formal income documentation, making it challenging to meet insurers' requirements for verifying financial stability.

2. There is often a lack of awareness about different term insurance plans that are tailored to the needs of freelancers and gig workers.

3. The entire process of applying for term insurance, understanding terms, calculating coverage, and managing premium payments can be quite overwhelming for a freelancer.

How Freelancers Can Easily Secure Term Insurance

Here are a few points which can help a freelancer to secure term insurance easily:

1. The first step is to select the right insurance provider. There are multiple service providers that offer special plans for freelancers. You should also check their settlement ratios, customer feedback, and financial history before deciding.

2. You should maintain clean income records such as ITR filings for at least three years (two years in a few cases) and bank statements for 6-12 months showing regular credits.

3. It is advisable to check policies online for seamless application, instant quotes, and transparent policy comparisons.

4. You must seek professional advice if anything is unclear, such as the coverage, exclusions, or rider options.

Features to Look for in Term Insurance Plan

Here is what you must look for in a term insurance plan as a freelancer or gig worker:

1. There should be flexibility in premium paying options, and you must look for plans that offer monthly, quarterly, or annual premium payments. As your income streams are irregular, it is important to have the freedom to pay premiums.

2. Choose a policy that offers high coverage within competitive premiums.

3. Always include different add-ons and riders for enhanced coverage, such as critical illness and accidental death benefits.

Summing up

As a gig worker or freelancer, you cannot ignore the importance of term insurance as part of your personal financial planning journey. When you choose to become a freelancer, you must have been drawn by the benefits of working freedom, creativity, upskilling, and reward-based work. However, it comes with massive issues, such as no support from an employer during downtime and instability in income.

Having term insurance can be the perfect tool for your financial planning and to secure your family's future in your absence. There are specialized plans made for freelancers and gig workers, which you can choose. The premiums are often competitive, with adequate coverage in an emergency.

FAQs

Can freelancers and gig workers get term insurance without a stable income?

Yes, many insurance providers offer term insurance plans tailored for freelancers and gig workers, considering their fluctuating income, with flexible premium payment options.

What documents are required for freelancers to apply for term insurance?

Freelancers typically need proof of identity, address, income records (like IT returns or bank statements), and a completed application form to apply for term insurance.

How can gig workers calculate the right coverage amount for term insurance?

Gig workers can calculate coverage by considering their financial liabilities, future family expenses, and long-term goals, ensuring it adequately secures their dependents.

Are term insurance premiums higher for freelancers and gig workers?

No, term insurance premiums for freelancers and gig workers are generally competitive and affordable, depending on the applicant's age, health, and coverage requirements.