Term Insurance For High Net-Worth Individuals (HNIs)

In today's bustling economy, High Net-worth Individuals (HNIs) not only wield significant financial resources but also steer the course of future ideas and business development. Take Rahul, for instance. He epitomises the visionary entrepreneur, transforming from rags to riches by building a tech empire. He started from scratch and now runs this empire that's not just creating jobs but making waves worldwide. Rahul's journey isn't merely about wealth accumulation; it's about navigating market dynamics with courage and strategic acumen.

But, despite their financial muscle, HNIs face a tough crowd. The future's uncertain, and keeping their family's lifestyle intact is a high-stakes game. Term insurance steps in here, a secret weapon offering HNIs peace of mind by shielding their loved ones from life's curveballs.

This article discusses about term insurance for HNIs, uncovering its perks, tax benefits*, and custom-fit plans. It's your go-to guide to shield your wealth and secure your clan's future, no matter what the market throws your way.

So, let’s begin!

Who Are The HNI (High Net-Worth Individuals)?

In our fast-moving world, wealth often stands out as a critical marker of financial success. High-net-worth individuals, or HNIs, are those wealthy individuals who've hit the big leagues financially. While the exact cutoff can vary, here in India, HNIs are generally individuals with investable assets topping Rs. 5 crore.

In the world of IPO applications, SEBI sets a bar: if you're dropping more than Rs. 2 lakh into the mix, you're officially an HNI. They've got this extra level, too, for individuals bidding between Rs. 2 lakh and Rs. 10 lakh, with one-third reservation of the HNI portion reserved just for them.

Now, let us look at a small glimpse into the world of financial giants and how they are classified!

What Are The Types Of HNI (High Net-Worth Individuals)?

Three classes represent individuals with a high net worth in the financial sector. Let’s look at each category properly -

1. High Net Worth Individuals (HNWIs): Investors who own assets worth up to Rs. 5 crore.
2. Very High Net Worth Individuals (VHNWIs): Individuals with net assets ranging between Rs. 5 crores and Rs. 25 crores.
3. Ultra High Net Worth Individuals (UHNWIs): These are individual investors who possess a net worth above Rs. 25 crores.

In the world of Initial Public Offerings (IPOs), the Securities and Exchange Board of India or the SEBI has further split Non-Institutional Investor or Non-Institutional Bidder (HNIs) into two categories based on how much they plan to invest. These two types of NIIs are - 1. Small NII: High net worth individuals who make investments in the range of Rs. 2 lakh to Rs. 10 lakh fall under this group.
2. Big NII: Individuals who make investments exceeding Rs. 10 lakh are classified as big NIIs.

Now, the important question: Why do HNIs require term insurance plans? Scroll below to find out!

Why Do HNIs Need Term Insurance Plans?

You know, many high-net-worth folks think their wealth can handle anything, yet life is loaded with shocks, all the more so with inflation on the rise.

Term insurance? It’s like your family’s secret superhero. Affordable, yet ready to swoop in with a big payout when life throws a curveball. It’s that peace of mind you need, covering the unanticipated so you can rest easy knowing they're taken care of. The more wealth someone accumulates, the more effort it requires to manage and protect those assets! If something were to happen to you, your loved ones might have to keep those valuable assets at stake, especially if there are some hefty debts hanging around.

And let's face it, high net worth individuals have a certain lifestyle. If the main breadwinner isn't around anymore, such a situation may force the entire family to lower their standard of living and abandon their ambitious plans. It's like suddenly losing the captain of your ship - you're left navigating some choppy waters without a clear course ahead.

You know, term insurance can really be a lifesaver for families. It's like having this financial safety net that keeps things running smoothly even if the worst happens. Imagine your kids' education and your long-term financial goals - all still on track because you had that cushion in place. And, for HNIs who run their own businesses or are entrepreneurs, their death can completely disrupt the business operations as it's not just about money but also about keeping the business afloat.

You know, term insurance is like a lifeline for businesses. These policies will help to pay off any outstanding debts and keep the business operational. This not only secures the family's main income source but also protects the jobs of employees and the interests of other stakeholders.

Why Should HNIs Consider Buying Term Insurance Plans?

Here's why term insurance plans are a great advantage for HNIs -

1. Financial Protection

HNIs possess substantial assets. Term insurance is like that safety blanket they hope they never have to use but are glad they have. If something were to happen to you, it would not just be about the assets you have amassed. It is about ensuring that your loved ones are cared for. Envision how eased you would be if you realised that in your absence, your family would figure out how to help themselves.

Thus, indeed, term insurance is most certainly something you don't think about consistently, yet it's exceptionally critical for your own feeling of harmony. Suppose something were to happen to you unexpectedly while the policy's in effect; term insurance kicks in to replace your income. That means your family can keep chugging along without financial worries.

2. Reasonable Coverage

Term insurance can provide your family with a substantial death benefit when you’re long gone. Its premium is also much cheaper than other forms of insurance. This is an attractive option, particularly for high net-worth individuals (HNIs), as they can protect their families without spending too much on premiums. That means you can be smart with your cash, putting it into other investments and savings instead. It’s a win-win situation: you get peace of mind and still have plenty left over to grow your wealth.

3. Debt Repayment

When you're rolling as a high net-worth individual, you might have loans hanging around for things like launching a business or buying a sweet home. Paying for the loans while you still live and earning is not difficult. But if you unexpectedly die while the policy is active, this debt will go to your dependents. If something happens to you, the claim amount from the insurer can help your family tackle these debts. This way, they won’t have to drain their assets or deal with financial stress.

4. Asset Protection And Liquidity

HNIs usually have a lot of their wealth locked up in non-liquid assets like real estate, businesses, or high-risk investments like stocks, etc. If something were to happen to them suddenly, their loved ones might need immediate cash, and these assets can’t be liquidated fast. A term insurance policy gives your family quick access to cash, so they can cover expenses without having to sell off valuable assets when the market isn’t great or unfavourable.

5. Tax Efficiency

Your tax bill will increase together with the increase in your earnings. But, by putting some money into term insurance, you can actually cut down those taxes when you're filing your ITR. Under Section 80C of the Income Tax Act, 1961 you can snag tax deductions up to Rs 1,50,000 for those term insurance premiums you shell out each year. Plus, the death benefit from a term insurance policy is usually exempt from tax under Section 10(10D)**, providing crucial financial relief when needed most.

Ever wondered which term insurance type fits like a bespoke suit for HNIs in India? Delve into the options below to protect your family’s future tomorrow!

What Is The Type Of Term Insurance Best Suited For HNIs In India?

HNIs have a lot of choices with regard to picking protection, contingent upon what they and their families need. Let’s look at each one below -

Increasing Term Insurance

In this type, the coverage amount grows over time, hitting a maximum limit set by the insurer. These plans are designed to fight off inflation and keep up with your increasing financial responsibilities. Picking this option means your family gets coverage that adjusts for inflation, keeping them well-protected.

Decreasing Term Insurance

Unlike increasing term insurance, in a decreasing term insurance plan, the sum assured drops at a predetermined rate, usually every 5 years, until it hits a limit, like 50% of the original coverage. This type is perfect for individuals whose financial responsibilities shrink over time, like business owners or homeowners with big loans that they’re gradually paying off.

The primary objective here is to ensure your family isn't hit with monetary pressure, assuming you die prior to clearing your debts. As your obligations shrink, so does the coverage, matching the lower need for financial protection. If you’re on track to pay off loans soon, this plan is spot-on. Should you pass away during the policy period, the insurer pays out the reduced sum assured to help your family settle loans or liabilities.

Whole Life Term Insurance

Very much like its name suggests, a whole life term insurance plan covers you for your entire life, mostly till 99 or 100 years of age. Most individuals do not survive until this age. This means that it is most likely that you will outlive the policy term. A whole life term insurance policy is top-notch for HNIs—it gives you coverage for life and doubles up as a solid estate planning tool. This ensures your family's protection regardless of when you pass away while also leaving a legacy for the next generation.

Hey, just a quick heads-up: every insurance company has its own fine print, so when they hand over those policy papers, it's worth diving into them. You need to understand what you're getting into, correct?

Wrapping Up!

Term insurance is like that trusty sidekick for HNIs, ensuring their wealth and family's future are safe and sound. It's all about keeping the cash flow steady, protecting your business ventures, and dodging tax assurance with some smart financial planning. You get affordable coverage, keep your assets free, and score some sweet tax breaks. When you're sifting through policy details, pick the one that feels like it was made just for you. After all, securing your legacy and your family's future? That's the real deal.