In the world of startups, where uncertainty and risk are constant companions, you must make strategic financial planning as an entrepreneur to create the difference between success and failure. A term insurance plan is one of the best options to help you create this difference. Apart from its primary function of providing financial protection in the event of death, you can utilise term insurance to achieve tax savings and grow your start-up in multiple ways. This article will explore how term insurance can help in startup success.
Why Term Insurance is Crucial for Start-Up Entrepreneurs?
Here are a few reasons why you must purchase term insurance for your startup success:
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1. Unique Income Source
Whereas a salaried individual works on a 9-to-5 basis, earnings from your business could vary greatly. It could be very challenging, especially if you have just started the operation and the returns are not enough after putting in full effort. When you are self-employed, the income generated out of it depends on the quantum of power you put into it.
In such scenarios, your death can cause a financial problem for your business and family. Therefore, you can buy a term insurance plan to secure your loved ones and protect the business.
2. Managing Liabilities and Loans
When you have a startup, its growth will always require funds for expanding the business or working capital. Although financial institutions or banks can provide funds for the business, it will only mean more liabilities for you.
In case of your absence, business liabilities will slow down your business and affect your family’s finances. Hence, you can lower such risks by investing in a term insurance plan to protect the family’s finances.
3. Continuity for Your Business and Employees
You can grow your startup through the loyalty and satisfaction of your employees. However, the loss of your key employees can result in huge emotional and financial losses. A term insurance plan ensures financial loss for your employees, as they will be getting their regular salary.
It lessens their burdens and ensures they are protected financially in case of a mishap. Moreover, it does not comprise a supporting environment but also hampers the skilled team members who will run the business continuously in your absence.
4. Tax Benefits
Another reason term insurance is crucial for entrepreneurs is due to the term insurance tax benefits under Section 80C and Section 80D of the Income Tax Act of 1961. It enables you to get tax benefits of Rs. 1,50,000 per annum for the premiums.
In addition, it makes you eligible for tax benefits of Rs. 25,000 for the premiums you pay for term insurance riders, including critical illness.
How to Choose the Right Term Insurance for Your Startup Journey?
Consider the following factors when selecting a term insurance plan for your startup needs:
- Death benefit for your beneficiaries
- Align the policy term with the anticipated business growth
- Options for paying premium, such as monthly, quarterly, or annual premium payment
- Adding riders for extra coverage
Final Words
Henceforth, operating a startup is an exciting journey because you work tirelessly to introduce your product or service to the world. However, while preparing for the future growth of your startup, you should not overlook unforeseen emergencies and plan accordingly. Hence, buying term insurance is the best-known risk mitigation tool to ensure that your dependents and business are not affected in your absence.