How Self-Employed Individuals Can Secure Better Term Life Insurance Coverage
Self-employed individuals often encounter hurdles when seeking term life insurance. These difficulties stem from fluctuating incomes and the lack of consistent income documentation, which traditional underwriting methods rely on. Government data reveals a significant shift in India’s employment landscape. The self-employed workforce swelled to 58.4% in 2023-24, up from 52% in 2018-19. This growth includes a substantial increase in women, particularly in rural areas, with 73.5% joining the sector.
However, the lower average earnings within this sector—₹12,585 per month, compared to ₹20,095 for regular workers—can make qualifying for term insurance more challenging. Sundeep Bhardwaj, Chief Business Officer – Retail, Go Digit Life Insurance, notes that insurers are adapting. “We recognise the difficulties self-employed individuals face in proving income. By using alternative income surrogates, we ensure broader coverage,” he explained.
Insurers are increasingly utilizing technology and artificial intelligence to improve their underwriting processes for self-employed applicants. They are now considering a wider range of income sources than traditional documentation. This allows for more accurate risk assessments and, consequently, better coverage options.
Bhardwaj advises self-employed individuals to carefully evaluate the appropriate sum assured. Factors to consider include income replacement for dependents, outstanding debts, and future financial goals such as education and major life expenses. Inflation must also be factored in when determining coverage needs.
Experts also stress the importance of maintaining consistent financial activity and proper documentation to secure policy approvals. As Bhardwaj explained, “Regular financial activity reassures insurers of an applicant’s ability to sustain premium payments, reducing the risk of policy rejection.”
Historically, self-employed individuals sometimes purchased multiple term policies from different insurers to increase coverage. Newer underwriting technologies, however, are helping insurers offer more comprehensive coverage under a single policy, lessening the need for multiple policies.
Bhardwaj suggests further enhancing a term life insurance policy with rider options. Disability cover, critical illness cover, and accidental death cover can provide additional financial security beyond the basic death benefit.
