Life insurance for high net worth applicants

Individuals with at least $1 million in liquid or investable assets are considered high-net-worth (HNWI). HWNIs may have a substantial amount of money saved, but this does not eliminate the need for life insurance. One of the most important considerations for life insurance is income replacement if the primary breadwinner dies. If the market falls, the amount of money you intend to leave your family may fall significantly. Even if you have enough money saved to protect your family's finances in the event of your death, you may want to consider life insurance as a backup plan.

Do high-net-worth applicants need life insurance?

Even high-net-worth individuals can face significant financial hardship as a result of economic and stock market downturns. If you have dependents as an HNWI, buying life insurance can provide you with peace of mind that your family or dependents will be taken care of.

Another reason high-net-worth individuals may consider life insurance is to offset estate taxes. Estate taxes are levied on a person's assets after death if they exceed a certain amount. For assets worth more than $12.06 million, the federal estate tax rate can reach 40%, while state tax percentages and exemptions vary. In Oregon, for example, estate tax rates begin at 10% and can reach 16%, while the state estate tax exemption applies only when the taxable estate assets are less than $1 million.

If you are a business owner or co-owner, life insurance can also protect your assets in the event of a sudden death through a buy/sell agreement. A buyout agreement is a contract funded by life insurance that can help reduce the financial impact of a business owner's or partner's death.

Life insurance for high-net-worth applicants

Life insurance may be advantageous to high-net-worth individuals for a number of reasons, depending on their circumstances and future financial plans:

• Tax-free borrowing: The cash value of life insurance can be used to obtain tax-free borrowing at low interest rates. Whole life insurance policies may also pay out tax-free dividends.
• Protect your business: As an entrepreneur, business owner, or partner, you can protect your stake in the company by signing a buy/sell agreement or a cross-purchase agreement.

A cross-purchase agreement is a formalized agreement in which the heirs of a deceased business owner sell their stake in the company back to the business. The proceeds will be distributed to the beneficiaries, who will receive a portion of the company's value. This also protects the company from new owners who may disrupt operations.

In the event of your death, the beneficiary, like all life insurance policyholders, will be required to claim the death benefit from your life insurance. To receive the death benefit, they will need to present a death certificate and may have to wait for a month or so. Your beneficiary can receive death benefits in three ways: lump sum premium payments, an annuity, or periodic premium payments.

Term life insurance

Term life insurance, as opposed to permanent life insurance, is only valid for a set number of years and is typically much less expensive. Term life insurance provides financial security for your loved ones for a set period of time, typically between 10 and 30 years. If you choose term life insurance, you will only have to pay a monthly or annual premium based on the terms of your policy. If you die before the end of your term, your beneficiary will be paid a death benefit. The policy will expire when the term expires, and your beneficiary will not receive a death benefit. If you still want coverage after your term expires, you may be able to convert your term life insurance policy to whole life insurance. Keep in mind that there is usually a deadline for conversion, so make sure you understand the terms of your policy.

Term life insurance is most commonly used by high-net-worth individuals or others to cover any outstanding debt, funeral costs, bills, or similar expenses. Term life insurance does not have a cash value component, so you cannot access the money you paid in premiums while you are still alive.

Permanent life insurance

Individuals with a large cushion of savings may prefer to apply for permanent insurance because the policy remains in force as long as you pay your premiums and includes a cash value component that can be used as a vehicle for low-risk investment and tax-free borrowing at low rates. Some policies include a minimum dollar amount of guaranteed returns and cap your returns at a certain amount.

Applying for life insurance as a high-net-worth applicant

If you have a high net worth, your search for the best life insurance company will be heavily influenced by your policy requirements and personal preferences. Getting and comparing life insurance quotes for the type of life insurance policy you want is a good place to start. You can also use a life insurance calculator to figure out how much coverage you need. Other steps that may be involved in the application process include:

1. Consider your medical history: When applying for life insurance, the insurer will typically check your medical history and require a medical exam as part of the underwriting process to determine the risk involved in insuring you. If you have a serious medical condition or a family history of medical problems, your life insurance eligibility and rates are likely to be impacted.
2. Select your policy type: Choose whether to apply for term or permanent life insurance. To determine which policy type is best for your situation, you should speak with a financial planner or an insurance agent directly.
3. Designate your beneficiaries: Your primary beneficiary is the person (or persons) who will receive your death benefit after you die. However, if your primary beneficiary dies before you, you can designate a secondary beneficiary. If you believe you require more, consult with an agent to see what they recommend. If you want your death benefit to go to your business, you should seek additional assistance from a financial advisor or insurance agent during this process.