HNWI (Lump Sum) Life Insurance
Life insurance is a great way to protect future beneficiaries and can also offer significant tax advantage opportunities.
It is quite common for people with a high net worth to wonder if they need life insurance as they have lots of assets, however, it’s those who are wealthy who stand to gain the most from life insurance.
It is common for clients to purchase a single premium paid-up permanent life insurance plan as a way to double, triple and even quadruple the amount of money that they leave to their heirs. There is no better way to leverage your money for beneficiaries than life insurance.
In the event of your passing, your heirs will likely have to pay hefty taxes before the transfer of your assets. This inheritance transfer becomes even more of an issue if your net worth is considerable. One solution is to take out a life insurance policy that goes to a trust; this lump sum life insurance payout will not be part of the estate, and your trustees can use the death benefit to pay taxes.
HNWIs often use life insurance for business purposes. Through a life insurance scheme, it’s possible to fund a buy-sell agreement – a contract stating that if one of the business partners dies the remaining partner buys out the equity from the deceased partner’s family. In some cases, business people also get life insurance to protect lenders and investors when they take out large loans.
Today’s life insurance policies are very innovative, and multiple carriers allow you to establish legacy gifts where the beneficiary receives payments every month or every year. Structuring a life insurance payment this way is appealing for those who would like their children or grandchildren to receive assets over time. Life insurance can help you to leave such a legacy.
Many HNWIs like to give back to their communities through non-profit foundations. Life insurance allows wealthy people to maximise their contribution to good causes without taking away from what they would leave for their family. They do this by taking out a life insurance policy and naming the non-profit they would like to donate to as the primary beneficiary of their policy.