Term insurance plans see 10% surge among self-employed, 41% opt for ULIP

Rhishabh Garg, Head of Term Insurance at Policybazaar.com, highlighted the significance of these shifts, stating, "New-age term plans cater to the needs of self-employed individuals, eliminating barriers faced due to traditional underwriting practices. Investing in term plans is crucial for securing financial stability, especially in the absence of salaried income."

A significant shift towards plans requiring no income proof for self-employed customers has been observed, representing 51% of policies sold in first half of 2023, up from 36% in first half of 2022.

ULIP investments have soared, constituting 41% of the policies sold.

Popular ULIPs offering a blend of protection and growth include TATA Smart Sampoorn Raksha-Param Rakshak, HDFC Smart Protect, Bajaj Invest Protect Goal, and Max Smart Flexi Protect Solution.

Notably, these ULIPs offer a higher life cover of up to 200 times the annual premium, deviating from traditional ULIP objectives, Policybazaar said.

ULIPs, designed for long-term goals, offer tax benefits under Section 80C of the Income Tax Act and zero tax on maturity proceeds. It also comes with an unique Waiver of Premium (WOP) feature, ensuring continuity of the policy in the event of the policyholder's demise.

Unlike traditional investment products, WOP in ULIPs safeguards various life goals, providing a protective mechanism that extends beyond standard investments like mutual funds or term insurance.

Insurers have revolutionised underwriting methods, eliminating the necessity for income tax returns or salary proof documentation. This change has significantly widened access to tailored term insurance plans for self-employed individuals.

Insurers now rely on digital parameters such as creditworthiness, surrogate proofs like Insured Declared Value (IDV) of owned assets, and GST database checks to ascertain the financial stability of self-employed applicants.

Self-employed individuals align with the practice of opting for term insurance coverage approximately 10 times their annual income.

The average sum insured varies across income brackets, with higher incomes reflecting higher coverage preferences, Policybazaar said.

Within the demographic of term insurance buyers, self-employed males dominate with an 89% representation, while females constitute a smaller share at 11%.

Maharashtra leads in the number of self-employed individuals purchasing term insurance, followed by Delhi and Uttar Pradesh in the North region.

In the South region, Karnataka, Andhra Pradesh, and Tamil Nadu witness high purchases.