Being wealthy only means that you need a lot of life insurance coverage and not the opposite. Life insurance for wealthy people is important and there are more than enough reasons why the wealthy need to buy life coverage. Whether it is to pay for their final expenses or for asset protection, there is always a need for life insurance.
Even more, there are different types of life insurance, and understanding each well helps you to make the right decision That said, below are some of the major policies wealthy individuals can consider.
Term Life Insurance
Term life policies are temporary policies that provide coverage for a specified timeline, eg 5 years, 10 years, 15 years, 20 years, etc, with the highest term period being 30 years. So if you decide to buy a term life insurance policy, then you need to consider your financial needs currently and at the end of the policy. For instance, maybe you are a 65-year-old who needs the policy to cover their final expenses, buying a 5-year term policy will not make sense, rather it would be safer to lock in a 20 or 25-year term policy. Term life insurance is simple and less expensive when compared to other permanent options.
Whole Life Insurance
Whole life insurance is a permanent form and this means that unlike it provides lifelong coverage. One thing that sets whole life insurance from term life is that it consists of not only the death benefit but also a cash/savings component. This allows the policyholder to withdraw or borrow against the cash value. Also, the policy premiums remain constant and as long they are paid when they should, the death benefits as well remain the same.
While whole life premiums are expensive, rich people can afford to pay for them, and two, the savings component is also used to obtain financing, and these make whole life insurance perfect for high net worth individuals. The wealthier you are, the higher premiums you can pay and this translates to better coverage.
Guaranteed Universal Life Insurance (GUL)
Guaranteed universal life coverage is a permanent type of life insurance with no market risks. It is different from whole life insurance in that it is easier to qualify for, even though both of them don’t expire. The death benefit and the premiums stay level until the policy pays out. If you want to avoid the hefty premiums for whole life insurance, then guaranteed universal life insurance is a great alternative since it is cheaper but still provides lifelong coverage. Even better, you get to choose the age guarantee, which ranges between 90 to 121 years. It is also flexible and you can always increase the death benefit if need be.
Age and Health Limits
When buying life insurance, good health is usually a plus because you get to pay lower premiums for more coverage. If your health happens to let you down, you can always opt for no exam life insurance, this way you don’t have to undergo the underwriting process. Your application also gets approved faster than the underwritten policies. So health shouldn’t be an excuse not to buy life coverage. Also, a lot of people shy away from life coverage because of their ages. According to this website, there are different life insurance packages to consider if you are over 50 years, so age should also not hinder you from having a policy.
To that end, the following are the major reasons why wealthy individuals need life insurance.
Paying Off Estate Taxes
This is the main benefit of life insurance for wealthy individuals. Most high net worth people amass wealth by investing in real estate and in addition, they tend to buy large and posh retirement homes. Some of these investments are worth billions of money, which in turn attracts millions in estate taxes. Depending on your age, health, and ability to pay a certain amount of premiums, it is vital to first determine the kind of life insurance policy you will need.
Permanent life insurance policies are expensive, and while a lot of middle class and lower class individuals cannot afford to pay for the premiums and maintain their lifestyles, a lot of wealthy people can comfortably afford them. But on the brighter side, the high premiums translate to more coverage. That is why life coverage is used to help protect assets by paying off estate taxes.
When a policyholder dies, the death benefits are usually high enough to cover the large pending estate taxes which if not paid may lead to the loss of the assets. Hence, life insurance is used to help protect one’s wealth.
Gives You a Peace of Mind
Having a lot of wealth also comes with several downsides. The more you have the more you become worried, and there is no peace in knowing that you risk losing your property to estate taxes. That adds to the amount of responsibility needed to protect these assets. But when you have a life insurance policy large enough to pay for these estate taxes when you die, it gives you a peace of mind. You don’t have to worry about losing everything you worked so hard for, and it also means that your loved ones won’t be left with a huge financial burden when you die.
If you are wealthy and don’t have a life insurance policy, there is so much you risk losing. You have loved ones depending on your finances and you don’t want them to be left suffering when you die, life insurance helps protect them. If you decide to buy a policy make sure to research well. Also, look for a trustworthy agent to help guide you through so that you avoid making the wrong decisions. The more informed you are, the easier it will be to avoid cons and the better decisions you will make.