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Term Insurance for High Net-Worth Individuals (HNIs)

High Net-Worth Individuals (HNIs) face unique financial challenges due to their substantial wealth and diverse investments. While term insurance is often associated with individuals and families seeking financial security, it can also play a crucial role in the financial strategies of HNIs. Buying term insurance plan with a large life cover helps secure their family members for the long term at low premium rates. 

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This article will explore how term insurance can benefit HNIs by protecting their assets, aiding liquidity planning, facilitating estate planning, and ensuring business continuity.

Who are the HNI (High Net-worth Individuals)?

The full form of HNI is High Net-worth individuals who are considered people with an investible surplus (liquid assets) of more than 5 Lacs. Investible surplus or liquid assets is the amount of money a person has freely available as savings that they can easily convert into cash for emergency situations. 

HNIs are defined as individuals whose investible assets, such as stocks and bonds, exceed a fixed amount and who own liquid assets, such as money held in brokerage accounts or banks. However, liquid assets do not include investments like purchasing a house, life insurance, a car, or any other personal assets that can’t provide liquid money in the time of need.

This means if anyone has a house, car, or any other personal property, they will not be considered as the person's liquid assets. 

What are the Types of HNI (High Net-worth Individuals)?

There are three types of High Net-worth Individuals (HNIs), and they are:

  • High Net-worth Individuals: People with liquid assets ranging from 5 Lacs to 5 Crores.

  • Very High Net-worth Individuals: People with liquid assets between 5 Crores to 25 Crores.

  • Ultra High Net-worth Individuals: People with liquid assets worth more than 25 Crores.

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Why Do HNIs Need Term Insurance Plans?

A lot of the time, High net worth individuals think they do not need term insurance since they already have liquid assets that their family can use in their absence. But this is not entirely true. Insurance companies are stressing the importance of high net-worth individuals purchasing term insurance plans because it helps HNIs secure their family and loved ones in their absence. 

These plans provide HNIs with the peace of mind that their family will be financially secure and able to maintain their current quality of life. HNIs are often categorized within the Silver, Gold, or Platinum Circle and are offered special features and extra benefits like customized welcome along with dedicated customer service, relationship officers, and instant query solving on the helpline number. People paying an annual premium of more than 50 thousand falls in the silver circle, while individuals paying premiums of 1 Lacs fall under the Gold circle category.

Various high net-worth individuals use other options like investing in market-linked funds and stocks to create wealth and thus ensure the financial security of their family by setting aside a small portion of the money to purchase term insurance for HNIs at much affordable premiums.

Best Term Insurance Plans For HNIs in India 2023

HNIs can buy any of the following term insurance plans in India:

Term Plans for HNIs Entry Age Maturity Age Sum Assured
ICICI Pru iProtect Smart All in One 18 - 65 years 99 years -
Max Life Smart Secure Plus 18 - 65 years 85 years 20 Lacs - No limit
Tata AIA Smart Sampoorna Raksha 18 - 65 years 100 years 1 Lacs - No Limit

Why Should HNIs Consider Buying Term Insurance Plans?

Let us take a look at why HNIs should consider buying term insurance plans:

  • Financial Security on Death: With term insurance plans, high net-worth individuals can secure a large life cover for their loved ones in their absence. This amount will be paid to their family members in case of their unfortunate death during the policy term.

  • Lower Premiums: Since term plans do not provide whole life cover or maturity benefits, term insurance for high net-worth individuals is available at really affordable premium rates. This way, you can get life coverage for a limited duration, and the policy will expire once your needs are fulfilled. You can also convert these plans into a whole life insurance policy, in case you want to secure your family for your whole life till 99/100 years.

  • Protection against Loans/Debts: A lot of the high net-worth individuals are business owners who might have started their business by taking loans like business or home loans, and in case of their untimely death, the family of the policyholder might be burdened with these debt repayments. A term insurance payout can help your family pay off any remaining loans and obligations in the long run.

  • Returns on Maturity: Regular term plans do not provide any maturity benefits, but term plan variants like term return of premium plans and 100% refund of premium plans return all the premiums paid towards keeping the policy active at the end of the policy term. This amount can help you and your family members beat inflation and secure your post-retirement life.

  • Better Financial Planning: When you have a better knowledge of the amount you are expecting as the return of premium, you can plan your finances better. Suppose you already have a life insurance maturing at the age of 65, and your term insurance for high net-worth individuals is supposed to end at the age of 65 as well, then you can secure your post-retirement life using the total amount you received.

  • Special Extra Benefits: By buying term insurance for high net-worth individuals, you can get access to the special benefits offered to HNIs, like specialized policies with additional privileges. 

  • Personalized Customer Support: HNI term insurance plans offer a specialized welcome where the dedicated relationship manager repeats the terms and conditions of the term insurance policy. The high net-worth individuals get personalized customer support and a quick guide on how to operate the company’s online portal.

  • Tax Benefits: Term insurance for high net-worth individuals provides tax-saving benefits as per the prevailing tax laws. The Government of India provides term insurance tax benefits u/s 80C on the premiums paid, u/s 80D on the premiums paid for riders like critical illness and hospicare riders, and u/s 10(10D) on the death and maturity proceeds received from the term insurance plans.

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What is the Type of Term Insurance Best Suited for HNIs in India?

The HNIs can buy any of the following types of term plans as per their requirements:

  • Decreasing Term Plans: Decreasing term plans can help HNIs get a life cover as per their requirements at highly affordable premiums. The premiums are lower than most types of term insurance plans because the life cover decreases over time.

  • Regular Term Insurance: Regular term plans offer a large life cover that remains constant throughout the policy term at affordable premium rates.

  • Whole Life Insurance Policy: These plans provide protection for the policyholder's whole life, i.e., till 99 or 100 years of age. These plans payout in case of the policyholder’s death to the nominee of the policy.

Why HNIs Prefer Buying Whole Life Insurance Plans?

HNIs or high net worth individuals are turning to whole life insurance policies since they offer long-term protection and tax-free benefits to the nominees. As per the new Budget 2023, the maturity returns for life and term insurance plans with annual premiums exceeding 5 Lacs will be taxable, but the death benefit proceeds from these plans will remain tax exempted. With whole life insurance policies, the assured can buy an insurance plan for a large life cover at affordable premiums and ensure their loved ones receive the death benefit in their absence without having to worry about taxes.

7 Factors to Keep in Mind Before Buying Term Insurance for HNIs

Here is a list of 7 points to consider before purchasing the most suitable term insurance for HNIs:

  • Assess your requirements: Before you buy term plan, you need to assess your requirements and find a term insurance plan that fits your requirements.

  • Select the type of term insurance: You can go through the types of term insurance available in India and select the most suitable plan from the insurer of your choice.

  • Choose the suitable life cover: Since the life cover is the amount payable to your family, you need to make sure the amount is large enough to cover your family’s financial needs in your absence, like paying off any remaining loans. Following the general thumbs rule, the HNIs should buy term plan at least 10 times their annual income. You can also use the Human Life Value Calculator to check the maximum amount of sum assured for which you can buy a term insurance plan.

  • Pick the required policy details: You should select suitable policy details like policy terms, available riders, death and maturity benefits, and other benefits offered under the plan of your choice. 

  • Compare available term plans: Before purchasing suitable term insurance for high net-worth individuals, you should always compare term plans online on the basis of the company’s CSR values, solvency ratio, and customer reviews.

  • Current Medical Conditions: Assess your family’s history and current medical conditions as they can impact the premium rates and the sum assured the insurance company offers. If possible, try to purchase the plan as early as possible, as the chances of you contracting life-threatening illnesses are less at a younger age, and thus you might get the term plan of your choice at a lower premium rate.

  • Appoint the Nominee: Appoint the nominee of your choice for the term plan and proceed to purchase.

FAQ's

  • Is whole life insurance good for high net worth individuals?

    Ans: Yes, whole life insurance is good for people looking to secure their family for their whole life and ensure that the family is financially stable in the absence of the main income earner to maintain their current lifestyle.
  • Does net worth include term life insurance?

    Ans: No, net worth does not include term life insurance. This is because term insurance does not accumulate cash value and thus is not considered a liquid asset.
  • What is a high net worth insurance policy?

    Ans: A high net worth insurance policy is a term insurance with a large life cover, enough to cover the needs of a high net worth individual. These plans offer special benefits and features along with a personal relationship manager.

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