Fortunately, you may find companies offering several life insurance options. You can compare the plans available and narrow your choices accordingly. You might have a variety of options to choose from, right from the comfort of your phone.
Why Is Life Insurance Essential for Business Owners?
Life insurance for small business owners may offer financial protection for their family and business. Having life insurance ensures that in your absence, the financial stability of your family and business is not severely affected.
Here are some benefits a life insurance plan offers to business owners:
1. Protection for Family Dependents
A life insurance plan can be a financial asset to protect your loved ones in your absence. Family members financially dependent on you might find themselves helpless in your absence. The situation may be even worse if you are the sole breadwinner in your family. One of The preferred way to stay protected against such scenarios might be via the purchase of a life insurance plan with a sufficient sum assured. A life insurance policy can ensure that if you lose your life someday, your family has a financial backup they can rely on in your absence. It may allow you to sleep peacefully, knowing that you have financial protection for your family.
2. Safeguards against Business Liabilities
Every business might require capital to grow and expand. And, borrowing money from the bank or other financial institutions to grow businesses may sound like a convenient option. You should ensure that you repay your liabilities on time. However, if you were to unfortunately lose your life, your family or co-founders, if any, may be burdened with paying off the debts. The financial pressure could be enormous for them to sustain themselves and pay off any debts the business may have. Life insurance may help in managing the risks in such unforeseen situations.
3. Tax Benefits:
A primary reason to buy a life insurance plan may be to provide financial protection to your dependents. Additionally, a life insurance plan can also offer several tax benefits. The premium that you pay for your life insurance are eligible for deductions from taxable income under Section 80C of the Income Tax Act, 1961, subject to the provisions stated therein. Under this section, you can claim a maximum deduction of Rs.1,50,000 annually on the premiums paid1. These additional tax benefits may also potentially make life insurance for business owners more advantageous. Deduction under Section 80C will be applicable if you choose the old tax regime, since the new tax regime does not offer any deductions under Section 80C of the Income Tax Act, 1961.
Apart from the tax benefits on the premium you pay, the sum assured that your nominee receives in your absence is also exempt from taxes, s per the Section 10 (10D) of the Income Tax Act, 1961, subject to provisions stated therein.
In the Union Budget of 2023$, it was announced that any income from life insurance policies (other than ULIP) where the aggregate annual premium is over Rs 5 lakhs will not be exempt from taxes. Death benefit received under such life insurance policies will continue to be tax exempt in the hands of recipient2.
As an entrepreneur, you need to protect your personal and business responsibilities. Life insurance may help you do so in an affordable manner. You can choose from different life insurance plans available online or offline and opt for the one that fits your needs. Ensure that your family’s financial needs, business requirements, and liabilities are accounted for while estimating your coverage needs. Life insurance is a financial decision that affects your business and personal life. Read the fine print before buying a life insurance policy to ensure that you have made a well-informed decision.
References:
1 https://incometaxindia.gov.in/_layouts/15/dit/pages/viewer.aspx?grp=act&cname=cmsid&cval=102120000000037018&k=&isdlg=0#:~:text=(1)%20In%20computing%20the%20total,%2Dsection%20(2)%2C%20as
2https://www.moneycontrol.com/news/business/personal-finance/budget-2023-tax-exemption-for-traditional-insurance-policies-9978941.html
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