Quick context: This article is about what changes when there is no employer behind your insurance. How large the covers should be is covered separately: health cover sizing and term cover by the 15x and HLV methods.
The decision to go independent usually gets weeks of thought about clients, pricing and GST registration. The insurance side gets about ten minutes, often on the last working day when HR mentions that the group policy ends tonight.
That is the moment most of the damage is done. A diabetes diagnosis from last year that the group policy covered from day one now becomes a pre-existing disease with a waiting period. Parents who were on the company floater are suddenly uninsured at 62. And nobody has thought about what happens if the one person generating the income cannot work for four months.
# What the group cover was quietly doing
Group health policies are generous in ways that are easy to miss until they disappear. Many of them:
- cover pre-existing conditions without the usual waiting period
- include parents, sometimes at a subsidised premium
- skip individual medical underwriting entirely
- carry the premium on the employer's books, not yours
When you leave, all of that goes at once. The replacement is an individual policy, bought at your current age and current health, with its own waiting periods. That is why the sequence of steps matters more than the choice of insurer.
# Before you resign: move the cover, do not restart it
# Ask about migration from the group policy
IRDAI's framework allows a member leaving a group health policy to move to an individual policy with credit for the waiting periods already served under continuous group cover. The formal routes are migration (to an individual policy with the same insurer) and portability (to another insurer). Practical points that trip people up:
- Start when you resign, not after the last day. Insurers expect the request before the group cover ends, and some want it well in advance. Ask HR for the group insurer's contact and the exact procedure in the first week of your notice period.
- Credit usually matches the old sum insured. If the group cover was ₹5 lakh and you want ₹15 lakh, the waiting-period credit typically applies to the ₹5 lakh portion; the rest can carry fresh waiting periods.
- Underwriting is still possible. The insurer can ask for medical details and price the policy accordingly. Continuity is protected; the premium is not.
- Every covered person matters. Spouse, children and parents each need to be moved. Parents are the members most likely to be refused or heavily loaded if they start fresh.
Months of continuous group coverage also count towards the 60-month moratorium after which non-disclosure can no longer be used to contest a claim, except for fraud — provided you move through migration or portability rather than letting the cover lapse.
# If migration is not offered, buy before you leave
If the group policy does not offer migration, buy an individual policy while you are still employed. Its waiting periods start running while the group cover still protects you. By the time you leave, some of the clock has already run.
# Health: what is different when you pay
The structure is not different from anyone else's: a base policy, with a super top-up for the large bills. The sizing is covered in the health cover guide. What is different for the self-employed is cash flow and continuity.
- Premium timing. A large annual premium due in a slow month is a real problem. Many insurers allow instalment premiums. The grace period is 15 days for monthly instalments and 30 days for other modes, and IRDAI's 2024 master circular keeps cover in force during grace where premium is paid in instalments.
- Never let it lapse. A lapse resets every waiting period. For a self-employed person, it also resets something harder to rebuild: insurability. Put the renewal on auto-debit from a bank account you do not plan to close.
- Parents separately. If they were on your group cover, price a separate policy for them now. Expect pre-policy medical tests, co-payment clauses and fresh waiting periods for anything not carried over by migration.
# Term insurance: your ITR is your underwriting file
The sizing logic is the same as for a salaried person — HLV or a needs-based method. Two things are different.
Proof of income decides how much you can buy. Insurers generally cap life cover at a multiple of proven annual income, and for a self-employed applicant the proof is usually the last two or three years of income-tax returns. If you declare income under the presumptive scheme — Section 58 of the Income-tax Act, 2025, which replaced old Sections 44AD, 44ADA and 44AE — your returned income can be well below what your household actually lives on. A professional declaring the 50% presumptive figure on ₹40 lakh of receipts returns ₹20 lakh, and the insurer's multiple applies to that.
Business debts belong in the calculation. If you have personally guaranteed a business loan, a working-capital limit or an office lease, your family inherits that exposure. Add it to the cover, not to the "someone will figure it out" column.
# Disability: the risk nobody prices
For a salaried person, a few weeks of illness means paid leave. For a freelancer, it means no invoices.
Take an assumed consultant earning ₹18 lakh a year with household expenses of ₹9 lakh. A six-month recovery from an accident means ₹9 lakh of income that does not arrive, while roughly ₹4.5 lakh of expenses continue — before any medical bill. Health insurance pays the hospital. It pays nothing towards the rent.
Three tools cover this gap, in this order:
- A larger emergency fund. Where six months of expenses may suffice for a salaried household, a self-employed one should plan for more, because the income is less predictable even when you are well. The emergency fund guide sets out the method.
- A personal accident policy. Look for permanent total, permanent partial and temporary total disability cover — the last usually as a weekly benefit while you cannot work. It is typically inexpensive relative to the cover and, unlike the group personal accident cover you had, it is yours.
- A disability rider on the term plan, only if you have no personal accident policy. Rider definitions are usually narrower — often total and permanent disability only — so read them before treating the rider as a substitute.
Pure income-protection insurance — a monthly benefit for illness-related inability to work — is not widely available to individuals in India. That is exactly why the emergency fund carries more weight here.
# Business covers, briefly
These are business decisions, not personal finance ones, so only the outline:
- Professional indemnity. Covers claims from clients alleging a financial loss caused by your professional work or advice. Relevant for consultants, IT contractors, designers, architects, doctors and similar. Check your client contracts; some require it.
- Office or shop package policies. Fire, burglary, equipment breakdown and similar risks to your premises and assets. Relevant once you hold meaningful equipment or stock.
- Group health for staff. If you employ people, a group policy is a business expense. Note that group policies still attract 18% GST, while individual health and life policies have been GST-exempt since 22 September 2025.
Each of these is worth a quote from more than one source. None should be bought before your own health, term and disability covers are in place.
# Tax: what counts and what does not
Personal premiums are never business expenses. Your own family's health, term and accident policies are personal. That is true whether you maintain full books or declare presumptive income under Section 58. Under the presumptive scheme, the declared income is deemed to be after all business expenditure, and no further business deduction is allowed against it.
In the old regime, deductions from total income still apply. Health insurance premium qualifies under Section 126 of the Income-tax Act, 2025 (old Section 80D): up to ₹25,000 for self, spouse and children (₹50,000 if you are a senior citizen), plus up to ₹25,000 for parents (₹50,000 if they are senior citizens). Premium must be paid by a non-cash mode; only preventive health check-ups, within a ₹5,000 limit, may be paid in cash. Term premium goes under Section 123 (old 80C).
At the 30% slab plus 4% cess, a ₹25,000 deduction saves ₹7,800 of tax in the old regime, before any surcharge. In the new regime, it saves nothing.
The regime question is harder for you. If you have business or professional income, switching between the old and new regime is restricted rather than a free annual choice. The regime decision guide covers the rules for Tax Year 2026-27 (FY 2026-27 — the return you file in 2027, earlier called AY 2027-28).
# The order to do it in
- Before resigning: ask about migration from the group policy for every covered family member.
- Buy or migrate individual health cover, with a super top-up, before the group cover ends.
- Price a separate policy for parents.
- Size term cover, and buy it while your income proof is strongest.
- Add a personal accident policy with disability benefits.
- Build the emergency fund to match your income volatility.
- Only then, look at professional indemnity and business covers.
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# References (verified 23 September 2026)
- Ditto — Health insurance portability and migration rules
- Plum — What happens to health insurance when an employee leaves
- IRDAI (Insurance Products) Regulations, 2024 — text reproduced on TaxGuru (moratorium includes portability and migration)
- Business Today — IRDAI master circular grace-period rules, 31 May 2024
- Department of Financial Services — GST exemption on individual life and health insurance
- ClearTax — Section 126 of the Income-tax Act, 2025 (formerly 80D)
- TaxGuru — Presumptive taxation under Section 58 of the Income-tax Act, 2025
Disclaimer: This article is educational and general in nature. VittSphere ONE is not an IRDAI-registered insurer, insurance broker or agent, does not sell insurance, and does not recommend any specific policy or insurer. Migration, portability and underwriting depend on the insurer's terms and your health; confirm the procedure with your group insurer before leaving employment. Figures in the examples are assumptions for illustration. Tax treatment depends on your regime and facts; take professional advice for your case. Data verified 23 September 2026.
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