Best Life Insurance for High-Net-Worth Individuals | SelectQuote (2024)

FAQs

Best Life Insurance for High-Net-Worth Individuals | SelectQuote? ›

Cash value life insurance (also called whole life insurance) is a great form of life insurance for wealthy individuals.

A small number of premier insurance companies offer these products tailored to the unique needs of high net worth families. Chubb, PURE Insurance, Cincinnati Insurance, AIG Private Client, VAULT, and National General are all highly regarded insurance companies with products reserved for high net worth homeowners.

High-net-worth individuals benefit from having life insurance despite their substantial assets. Life insurance plays a crucial role in estate planning by providing a tax-free death benefit that can cover estate taxes.

Even though there are many different types of life insurance, the only kind we recommend is term life insurance. That's because you only pay for it while you actually need it, usually 15 or 20 years. All of the other kinds of life insurance are way more expensive, not to mention confusing.

Cash value life insurance (also called whole life insurance) is a great form of life insurance for wealthy individuals.

Excess money is “swept” into FDIC-insured accounts at multiple financial institutions. The process is simple. Your primary financial institution opens an ICS account on your behalf and that is where any of your balances that exceed the FDIC limits will be placed.

Typically, a high-net-worth individual has assets of between $1 million and $5 million. Those with multi-million dollar fortunes, generally assets of at least $30 million, are sometimes identified as ultra-HNWI (UHNWI). The term “net worth” factors in liquid or investable assets.

According to Schwab's 2023 Modern Wealth Survey, Americans perceive an average net worth of $2.2 million as wealthy​​​​. Knight Frank's research indicates that a net worth of $4.4 million is required to be in the top 1% in America, a figure much higher than in countries like Japan, the U.K. and Australia​​.

Life insurance is a popular way for the wealthy to maximize their after-tax estate and have more money to pass on to heirs. A life insurance policy can be used as an investment tool or simply provide added financial reassurance.

If you're on a budget and just want to provide coverage for your family, term life plans are often the most cost-effective option. On the other hand, if you're looking for lifelong protection with more investment potential, then whole life insurance may be a better choice.

Do you pay taxes on life insurance? ›

Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren't includable in gross income and you don't have to report them. However, any interest you receive is taxable and you should report it as interest received. See Topic 403 for more information about interest.

That means a $2 million dollar policy could be a good fit for someone whose annual salary is $200,000 to $400,000. You might also want to consider that much coverage if you have extensive mortgage or other debt, or if you're the primary breadwinner in your family.

Ramsey explains that whole life insurance is roughly 20 times the cost of term insurance. For the extra money you're paying, whole life insurance promises to pay interest on what you're paying in, but Ramsey says it's a very small amount and takes time to start accruing value.

Suze recommends that you should get term life insurance and continues to add that most people should get a 20 year term policy. Suze Orman also says that the coverage you should get, should be 20 times your annual income.

What should you invest in inside your 401(k) and Roth IRA? There are many different types of investments to choose from, but Ramsey says mutual funds are the way to go! Mutual funds let you invest in a lot of companies at once, from the largest and most stable to the newest and fastest growing.

Health Sharing Plans represent an innovative option for wealthy individuals seeking a flexible and cost-effective alternative to traditional health insurance. These plans are based on a community-sharing model, where members contribute financially to a communal fund used to cover eligible medical expenses of the group.

Companies offering auto insurance for rich people include State Farm, Chubb, and Auto-Owners.

Millionaires can insure their money by depositing funds in FDIC-insured accounts, NCUA-insured accounts, through IntraFi Network Deposits, or through cash management accounts. They may also allocate some of their cash to low-risk investments, such as Treasury securities or government bonds.

Platinum health insurance is the most expensive type of health care coverage you can purchase. You pay low out-of-pocket expenses for appointments and services, but high monthly premiums. Plans typically feature a small deductible or no deductible and cheap copays or coinsurance.