Are you self-employed? Have you also wondered why you need insurance? The employees of some companies do have some financial backing even if they have not bought insurance for themselves, as there are many company policies and benefit regimes where the employee is insured. The rise of the trend where people quit their unsatisfying jobs and start to earn on their own is on the boom.
This trend is fueled by technological advancement and is expected to grow even more. Starting something of your own is cool, but it also comes with some of its own sets of financial problems. There is the risk of irregular income patterns and sometimes even losses due to business-related expenses. Apart from this, employee benefits like health insurance and retirement plans are lacking, and this is when self-employed people start to take insurance and get financial security.
What is the Status of the Self-Employment Sector in India?
In recent times, we have seen a massive surge in self-employment. There were 333 million self-employed people in India in 2021. In 2018-2019, the percentage of self-employed people in the total employed population of the country stood at 52 percent. While this figure rose to 57 percentage in the year 2022-2023.
Further, Factors include flexibility of time, aspiration to do something entrepreneurial, or need for a diversified income stream. But this also brings up specific problems like irregular income, sole responsibility for expenses, etc. There is the risk of any unwanted event that you might never want.
What are the Financial Risks of the Self-Employed?
First, we must understand the financial risks that self-employed people might face before they start to think and take insurance.
Medical Emergencies
Self-employed people lack the traditional health benefits that a company provides. We all know illness is something that no one of us can predict. There can be a substantial financial burden in an unexpected medical emergency.
Apart from this, if an employee faces illness, he can get some paid leave but in the case of self-employed people, they take even a single day off, meaning they have no earnings that day. That is why self-employed people should be more cautious in their financial planning.
Liability Issues
We are only aware of the positive, shiny side of self-employment. We are unaware of some consequences that we might face. Consider yourself an insurance policy consultant; you know you will earn money when you consult a company, and then the company will get some returns. But what if the company goes into losses and files a lawsuit against you? Big consulting firms have an established legal team to handle such cases.
But how will self-employed contractors or freelancers bear the expenses of such legal matters? For these kinds of cases, it becomes essential for self-employed people to have liability insurance. So that if something goes wrong, they do not go into a financial crisis.
Misfortune Events
Operating the operation of the business without a safety net of protection keeps a self-employed person in a very vulnerable situation. Unlike the more prominent companies, self-employed people do not have that many resources and contingency plans.
Self-employed people will have to deal with that themselves only. Any outside events can directly impact the earnings of the self-employed worker. They will not only suffer the loss of not working for that duration, but they might also face the loss of projects and clients.
Understanding these factors can help you understand your need for insurance better and take insurance that suits your needs.
What are the Benefits of different types of Insurance for the Self-Employed?
Above, we have discussed the need for self-employed insurance. Now, we will discuss the need for different types of insurance for different situations.
Health Insurance
Health issues are some that no one can predict, and anyone can come across them any time. Medical bills are costly, and if we do not have any financial backing, it may lead to a financial crisis. Having health insurance ensures that you can access top-notch health facilities without putting all your savings into it.
Many insurance companies do have tie-ups with top hospitals so that you can have cashless hospital visits. So, considering the risk factors and today’s lifestyle, it becomes essential for not only the self-employed but everyone to have health insurance.
Liability Insurance
Self-employed people are solely responsible for their expenses. So, if a legal issue occurs against them, they will have an unexpected financial load for them. In the age of technology, anyone can file claims of copyright, because of which companies or clients can file a lawsuit against you. Liability insurance becomes essential for protecting you from any financial crisis because of these kinds of cases.
Liability Insurance is also important as it provides coverage for any harm caused by you or your business to anyone. For example, in your provinces, if the client gets injured or has some accident because of your company, then the expenses for the compensation or medical bills are filled out by the coverage for your liability insurance.
Disability Insurance
The employees of a company do have some paid leaves if they cannot work because of some injury or illness. But, for self-employed people, they will earn nothing for the time they do not work. Disability insurance becomes essential for self-employed or freelance contractors as they do not have the benefits of paid leaves and disability benefits.
Disability insurance provides coverage during the phase when you cannot work so that your financial needs are met, and it prevents your business from going bankrupt.
Life Insurance
One of the best financial advice you can get is to take life insurance from the best insurance company in India. Self-employed people are dependent solely on their one income stream. Their family will not get any benefits from any company upon their death.
There are many cases where a self-employed person is the family's sole earner, and his family got into a financial crisis after his sudden demise. Having term insurance for self-employees secures your family’s future and ensures they do not get into financial trouble after you.
What are the Common myths about self-employed Insurance?
I'm healthy and young, so I don't need health insurance
Today, you might earn well and have savings that can bear all your needs. But life is very unpredictable. Health issues and accidents can occur at any point in life and can take away all your savings in a minute and put you and your family in a financial crisis.
The business is small, so liability insurance is not required.
Every contract work, whether taken up by a company or solo self-employed work, makes them eligible for a lawsuit against them if they deliver inadequate work. No matter what the case is, it can cost you a lot. According to the National Federation of Independent Business (NFIB), 33% of small businesses face yearly lawsuits. So, operating your business without any financial protection would not be wise.
Negligence of insurance
People often ignore insurance because of the small cost they pay as premiums. Yes, you might never need to use your insurance. But insurance is not like investments that give you a return. It is the protection that will prevent you from any financial crisis.
So, saving a small amount as a premium could cost you much in the long run. We must understand insurance is not for good times. It is for mitigating damage caused by tough times.
Although being self-employed allows you to earn more and grow, insurance becomes essential for safeguarding your journey for growth against any unwanted financial problem due to an unexpected event.
