High Net Worth Life Insurance, a Guide for Wealthy Individuals

Life insurance for high net worth

When you’re a high net worth individual, it’s easy to think that you don’t really need a life insurance because you already have enough money and investments that can secure you financially.

Which isn’t always true.

By definition, you are a high net worth individual if you have no less than $1 million in investable assets. That’s excluding the real property value of your home. Of course, that’s just a modest estimate and let’s assume that your total wealth is way higher than just a million dollars.

Your assets are just one side of the coin. The flip side, which many wealthy people are prone to ignore, are the high expenses, tax liabilities, outstanding debts, and the dreaded financial market risks.

We’re not drum-beating a financial doomsday scenario here, but in the real world, people lose money all the time. The amount of money that you can lose is actually near-proportionate to the amount of your wealth.

Just think of your high living expenses and the risks involved in your personal lifestyle and business. The last thing you need is to face a maelstrom of financial troubles when things go south when it comes to your investments.

The point is, be wealthy and wise. Getting covered by life insurance is one of the smartest things you can do to protect you from all types of risks.

Essentially, an insurance benefit can be tax-free. Despite your high financial capability, it’s a great tool to protect your business and assets without tapping into your investments.

To give you a clearer picture, we discuss below  5 of the most tangible reasons why you need an insurance.

5 Reasons Why You Need Insurance Despite Your High Net Worth

Even though you can probably self-insure, there are still reasons for someone with a high net worth to get coverage. Whether its to protect your assets from your liabilities or protect your business partners, here are a few reasons you may still need life insurance if you’re wealthy.

Ensure Smart Estate Planning

Insurance is one of the smartest strategies when it comes to estate planning and management. This is especially significant if the worth of your total estate assets exceeds the threshold amount for federal tax exemption.

With the newly adjusted estate tax limit already in effect, the only tax-free amount that you can leave behind for your heirs when you die is $11.18 million. If you are married, you can combine the tax exemption with your spouse and leave your kids and other beneficiaries a doubled tax-free amount worth $22.36 million. Beyond that, your whole estate distribution will be levied with a high federal estate tax rate which is currently at 40%.

In the event of your death, the federal tax can be a very heavy burden for your heirs when it comes to the distribution of your wealth. If you have a large estate, you should know that will and trust alone wouldn’t be enough to protect it. A large tax would be very difficult to pay within the required period of nine months if you don’t have enough liquidated assets. But with insurance, your heirs will have an additional source of fund to buffer the financial burden caused by the estate tax.

But it’s not just about the burden of a federal tax. A high insurance premium will serve as an added bonus for your family if there’s still left after the tax is deducted. This money can also be used, not only to cover immediate expenses after your death but also to simplify and equalize the distribution of your wealth among your heirs.

Pay Off Your Debts

Debts come in many forms, and despite your large assets, it is most likely that you have debts. It could be outstanding loans or business-related debts. Whatever it is, it is an amount owed that your family or your business will have to pay once you pass away.

It is easy to dismiss the high burden caused by debt payments when you’re still alive because you have ways to pay them anytime. But when you’re gone, you can’t say the same for your heirs who will not have the benefit of your steady income and money-stream.

In most cases, the families left behind by high net worth individuals are forced to liquidate assets and sell them at a much lower price just to pay off debts. It is not an ideal situation if you’re an heir.

By having an insurance, you are not only protecting your assets, but you are also helping your loved ones. The proceeds from your insurance benefits will help them to easily carry the burden of paying off the debts that you left behind without the need to lose the most important family assets.

Help Your Family Afford the Lifestyle That They are Accustomed to

If you have a family that’s largely dependent on you financially, your death would be the hard blow to each of your heirs. Your financial support will be gone the moment you die and they might be forced to readjust their lifestyle.

Each member of your family also has specific needs, and if you’re the one providing to meet those needs, then it will severely affect everyone’s current life and even future.

The education needs of your kids is a prime example. The loss of your support will definitely lead them to rethink their options, especially when they still need to finish college. And that’s just one example.

There’s also the matter of lifestyle. Their affluent life may be gone or slightly moderated when you’re gone.

Yes, you might have assets that can support them, but liquidating them takes time and the available family funds may not be enough to help them keep and afford the lifestyle that they’re accustomed to.

And remember, even if there are liquidated assets, a big chunk of these assets will most likely be used to cover more urgent expenses, some debts, and even taxes.

With an insurance, however, your heirs would have a ready and accessible fund that can take care of the expenses without them needing to adjust their life.

Protect Your Business

If you have a business, then for sure you’re aware of the risks involved if you pass away. If your company mainly relies on you, your death will certainly create a situation where it can go at any time.

There are many ways why having an insurance can benefit and protect your business. A key insurance person policy, for example, can help your business remain financially strong because there would be enough funds to cover the financial loss that’s caused by your death.

In other cases, the insurance benefits can also be used to cover the buy/sell agreement that ensures that your company stays afloat under the management of your trusted partners or co-owners. It means your company will keep running and maintain its stability without changing ownership. And, of course, your share from the company will still go to your heirs.

If you have taken a loan to finance your business, having an insurance as a collateral assignment would also help to cover the payment to your lender who is your designated beneficiary. In this case, you protect your business from losing money from the payment you owed.

Gain Additional Investment/Asset

One of the best benefits of insurance policies, at least for high net worth individuals, is they can be used as additional assets. And in many ways, they are great forms of investment as well.

Generally speaking, when you buy a permanent policy which you can very well afford, you are putting yourself in a position to gain more monetarily because of its cash value.

We have to say, however, that making an asset out of an insurance is not a good idea. But the best way to boost your family’s wealth through insurance is by getting a term policy and invest whatever you save from premiums through the help of a financial advisor. This way, your money will just grow.

Best Life Insurance Companies for High Net Worth Individuals

When looking for the right insurance company that fits your profile and net worth, always consider reputability, experience in the industry, type of clientele, and capability to provide high coverage. There are many life insurance carriers that cater to high net worth individuals, but here are some of the top insurer that you might need to check out.

Massachusetts Mutual Life Insurance Company (MassMutual)

As one of the biggest and most reputable life insurance companies in the United States, the Massachusetts Mutual Life Insurance Company or MassMutual should be one of your top picks if you’re looking for a stable insurer that pays high death benefits.

MassMutual was among the oldest and most established in the insurance industry, and it speaks volume about its stability. Based in Springfield, Massachusetts, MassMutual has been in business since 1851 and has grown into one of the strongest life insurance providers in the country.

As a mutual life insurance company, MassMutual is basically owned by its own policyholders, which means it is free of the interests of shareholders that are typical in most established companies and organizations. Currently, it boasts of 5 million policyholders. If you buy a whole life insurance with the company and become an eligible member, you are entitled to certain dividends. This year alone, it was reported that the company is poised to pay around $1.6 billion to its policyholders. In 2016 alone, its payout to its policyholders reached the staggering amount of $5 billion.

The company’s financial strength is also very outstanding. It has a great balance sheet and was considered very strong in terms of performance, market position, risk management, capitalization, and many other aspects of its business and operations. It has profited billions in the past several years and still predicted to enjoy more growth in the coming years. This financial strength is a good sign because it reflects its capability to pay you when the time comes.

In terms of credit ratings, MassMutual and its subsidiaries are rated A++ by A.M. Best, Fitch Ratings, and Standard & Poor’s. Moody’s rated it Aa2 as well. These are all excellent and superiors ratings and certainly a good indicator that it can meet its financial obligation to its policyholders.

With regard to its life insurance products, MassMutual has a whole range of policies which include term life insurance, whole life insurance, universal life insurance, and variable universal life insurance.

Mass Mutual’s term life insurance is offered at 10 to 20 years term and it is open to conversion if one opts to choose a permanent policy. Take note that this insurer has a wide range of flexible policy options, and it’s up to you to determine which one can possibly meet your goals. Overall, this a great insurance company and you might no go wrong if you buy a policy.

AXA Equitable Life Insurance Company

The AXA Equitable Life Insurance Company is one of the oldest, most popular, and highly rated insurers in the United States. While it offers a suite of insurance solutions, it is more known for its life insurance and retirement products.

This company was founded in 1859 under the original name Mutual Life Insurance Company. In 1991, it became part of the French giant insurance firm AXA Group. Since the acquisition, the company converted from being a mutual life insurance company to becoming a stock company. This development paved the way to its re-branding into its current name, the AXA Equitable Life Insurance Company. Officially, it is one of the subsidiaries of AXA Equitable Holdings, LLC.

AXA’s main headquarters is located in the Avenue of the Americas in New York City, although it conducts its national operations from Charlotte, North Carolina. It has other offices in various locations in the country, including Syracuse, New Jersey, and Connecticut.

Being a part of the multinational company AXA Group which is present in 59 countries around the world, there is no doubt that this company is well established and very strong financially. In terms of credit ratings, it has an A+ from A.M. Best, AA- from Fitch, A+ from Standard and Poor’s, and Aa3 from Moody’s. It also has A+ rating as a BBB-accredited company.

AXA is great in terms of its life insurance products. It offers term life insurance, whole life insurance, universal life insurance, and variable life insurance.

Its term life insurance under the BrightLife® Term is convertible, temporary, and offered as a fixed premium with a protection period of 1, 10, 15, or 20 years, depending on your preference. Its whole life insurance under the Sensitive Whole Life℠ is also a fixed premium that is offered with a guaranteed cash value that accumulates or increases every year.

AXA’s universal life insurance under the BrightLife® Grow is offered with flexible premiums and potential cash value. With regard to its variable life insurance product, the company offers its IncentiveLife Optimizer® III and IncentiveLife Legacy® III that provide flexible premiums. They have a potential for cash value accumulation as well as investment options.

Pacific Life

Pacific Life is among the old guards in the insurance industry and it remains one of the most robust, reputable, and stable companies that you can find in the country. Founded in 1868, this California-based insurance company has been in the business for 150 years.

Pacific Life has a rich portfolio of life insurance products which include the variable universal life insurance, indexed universal life insurance, term life insurance, whole life insurance, and a life insurance that provides long-term care benefits.

In terms of its financial strength and stability, Pacific Life boasts of $158 billion worth of assets and it ranks 313th in the 500 companies in the United States. It’s an industry giant, to say the least.

As of last year, it has $11.3 billion in equity, $9.4 billion in operating revenues, and 774 million in terms of operating income. It’s also the top insurer when it comes to sales in indexed universal life insurance and universal life insurance.

In terms of credit ratings, Pacific Life has an A+ (superior) from A.M. Best, A+ (strong) from Fitch, AA- (very strong) from Standard and Poor’s, and A1 (good) from Moody’s.

It’s Not Always Company Specific

Truth is you can get life insurance with just about any company depending on your goals. Especially if you are a high-risk case in terms of health or occupation, it may be wise to go with a different carrier that will insure your risk at a better rate. Let us do the legwork for you, it won’t cost you anything extra, and will save you money.

Should You Self-insure, Get a Life Insurance, or Both?

With no element of urgency, this is a question that is easy to dismiss, especially if you are a high net worth individual. But when you begin to look at insurance as a need, you’ll find that it is a question of priority.

While you can afford to self-insure due to the availability of funds—sourced from your business or steady high income—there’s always a risk that you will overlook its importance. Getting an insurance is a great option to buffer you financially when you need it most.

The best choice is to do both.

Getting a life insurance and personally allocating funds to finance your business, pay off debts, and support your family as an economic precaution in case you die is the best practice.

But if you can’t set aside funds and self-insure, it is still in your family’s best interest that you get an insurance that would cover the financial needs of your heirs when you’re gone.

How to Know You’re Working With the Right Agent or Agency

Nothing beats having an expert on your side, and the same thing could be said when you’re shopping around for an insurance. It’s why insurance agencies exist and why insurance agents are too valuable.

Remember that getting an insurance might become daunting. Your goal is to narrow down your choices from so many options and end up getting the best deal. But this might prove difficult if you don’t know what you’re looking for and have no idea how the different types of insurance work. You don’t want to get tied on a policy where you’ll be paying a very high premium but with little return.

Hiring an insurance agency or working with insurance agents can help you avoid these pitfalls. But how would you know if you’re working with the right agent or agency?

To find the right insurance agency or agent, it would greatly help if you do a little bit of homework. Do some research, ask from trusted sources, and find out as much about your top picks before you hire one.

Generally, the best agents or agencies are those with solid and established backgrounds. Normally, they already have high-net-worth clients and they work with some of the best insurance companies in the industry.

When it’s time for you to choose, it would be preferable if you hire not just an agent but a financial advisor. This ensures you that your financial interests will be protected at any time.

Work With Us!

At CFA Insurance, we can help you find the right insurance that suits your needs. We have access to the top life insurance carriers in the country and we have a solid network of insurance agents and companies.

We also aren’t just insurance agents, but a team of financial advisors that can help outline the best policies for you based on your specific needs.

As experts in the industry, we can help you get the right quotes, compare the rates, and find the best life insurance deal. You can get started today by either calling us at 212-573-5563 or by filling out our quote request form so we can contact you immediately.