Life Insurance for High Net Worth Individuals
By properly developing an estate plan and utilizing the right type of life insurance, you can ensure the livelihood of your loved ones even when you’ve passed on.
Life insurance can also provide a source of income replacement if you pass away unexpectedly. Continue reading this guide to life insurance for high net worth individuals to determine which type of coverage is best for your situation.
Here’s what we'll cover in this post:
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Life insurance is usually purchased by a family's primary breadwinner to provide for their loved ones if they pass away. If you have a high net worth and some savings set aside, you may be self-insured. Especially if your loved one's won't need any assistance with their finances when you pass away.
While your family might already have an income to pay their bills, your heirs could still lose some of the wealth you have acquired. Most high net worth individuals own large estates and property, but these assets are not liquid, and often create a tax liability for your heirs.
In addition to federal estate taxes, some states also have their own inheritance or estate taxes that are determined by the value of your assets. Oftentimes, these tax burdens will force surviving families to liquidate the assets that were left behind.
To help preserve their assets for future generations, wealthy people often purchase permanent life insurance. The death benefit from these policies can be used to settle the tax liabilities that would have been left behind. This will allow your entire estate to remain intact for future generations.
If you don't need to preserve your estate for future generations, term life insurance may be a better fit for your needs. Term insurance provides the most coverage for the least amount of money. Common reasons for purchasing term life insurance include income protection, collateralizing business debt, and securing the balance of a mortgage.
While term life insurance does not provide permanent protection, it will protect you during the years that you are most financially vulnerable. This could be until your kids are out of college, your mortgage is gone, the investment properties have been paid off, or your business loan has been settled with the lender.
We represent more than 50 top-rated term life insurance companies and some specialize with applicants who need a large amount of coverage. Others offer more lenient financial requirements for large amounts of coverage, or may be more suitable for people who have pre-existing health issues.
To compare monthly rates from dozens term insurance providers in less than a minute, please select your coverage needs below to get started. We'll show you all of your available options before you need to speak with an insurance agent. Of course, you can always call us toll-free at: 855-247-9555
Every life insurance company sets their own rates and underwriting guidelines, and some top-rated companies cater specifically to individuals with a high net worth. The type of coverage you need, your overall health, and your age will also determine which companies are the best fit for your profile.
If you are shopping for a permanent life insurance policy to leave an inheritance behind, fund a trust, or maximize your pension, guaranteed universal life insurance is your best option. These policies offer permanent life insurance protection without the investment risk.
With guaranteed universal life insurance, your coverage and rates are fixed until the age of your choice. Most policies will offer a rate that is guaranteed until age 90 or later, but if you need permanent life insurance protection, you should consider locking in your rates until age 100, 105, 110, or 121
We work with more than 50 top-rated life insurance providers, but only about 30 of these companies offer this risk-free product. To instantly compare guaranteed universal life insurance rates now, please enter the amount of coverage you need and until what age below.
Life insurance can play a vital role for businesses as well. Business owners commonly buy life insurance on each other to mitigate risk. In the event of an untimely death of an owner, the death proceeds from their life insurance policy creates an influx of cash.
This cash can be used to provide your business with working capital immediately until a suitable replacement can be found. This type of life insurance is also known as key-person life insurance. Life insurance can also be utilized in a buy-sell agreement.
A “business” can technically purchase and pay for life insurance on its owners. If an owner passes away, the life insurance is paid to their family; settling their ownership share of the business. This allows the business to continue operating without being forced to liquidate or sell assets.
This type of coverage also ensures that your spouse will not have to endure your business partners or vice versa. Term life insurance is usually the best option for most small to medium sized businesses.
In 2022, the federal estate tax exemption was set at $12.06 million with a tax rate of 40%. While most estates will fall below this exemption, its important to note that the exemption will revert to roughly $6 million per individual in 2026. In addition to federal taxes, your heirs could also owe state inheritance taxes depending on the state you reside in.
For some of our client's theirs will face losing almost half of they assets they've worked their entire life to acquire. As an example, Oregon imposes estate taxes on any assets that exceed $1,000,000 dollars. In New Jersey and Pennsylvania, non-immediate family members could owe inheritance taxes on as little as $1,000.
To avoid crippling estate taxes, tax attorneys, bankers, financial planners, and skilled life insurance agents often recommend creating a trust. This will separate the value of your life insurance policy from your estate.
These trusts, also referred to as irrevocable life insurance trusts (ILITs), create an influx of un-taxed cash at your passing. This cash is then used by your trustee to settle the estate taxes your heirs would owe, leaving your assets intact. To create an ILIT, you need life insurance for funding. Most experts recommend guaranteed universal life insurance for this purpose.
Guaranteed universal life does not carry the same risks as a non-guaranteed universal life insurance policy. If you make you payments on-time each month, you won't have to worry about losing your coverage. Your payments are guaranteed to remain level until the age of your choice, usually age 95 or later.
In addition to reducing or eliminating estate tax liabilities, there are other reasons many high-net worth individuals rely on estate planning with life insurance. Life insurance death benefits typically pay your beneficiary or beneficiaries a lump sum.
With an estate plan or a trust, you can assign annuitized installment payments to your children or grandchildren. This will prevent them from spending the money you left them too quickly and allow it to grow. If your beneficiaries are young, a trust can hold the assets you leave them until they are older and more mature.
Life insurance trusts also keep the final details of your life insurance private and out of public record. This prevents collectors from trying to come after your beneficiaries for unpaid debts. It also keeps prying eyes from knowing your family’s business.
With a proper estate plan, your heirs will be able to enjoy the assets you own for generations to come. If you don't have to worry about estate taxes, you can also establish a legacy by leaving an inheritance behind.
High-net worth individuals have much different needs for life insurance than an average individual or family. If your heirs are facing an estate tax liability, or if you want your assets divided equally amongst your heirs, you should consider creating an estate plan.
A traditional term life insurance policy is not going to provide your estate with the tax protection needed. We have helped hundreds of high net worth individuals utilize estate planning and life insurance to ensure their estate passes on to their loved ones seamlessly when they are gone.
We always recommend working with an estate or trust attorney to create an irrevocable life insurance trust. Once your trust is created, we'll shop more than 50 top-rated life insurance carriers to find your best solution. We're licensed in every state and our shopping services are free.
We offer our clients with the advice they need to find the best options available. If your not ready to speak to an agent now, enter your information in the form below. In less than an minute you'll be able to view rates from dozens of insurers.
Managing Partner and Co-founder
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.