5 Tips on Life Insurance That the SUPER RICH Never Tells You.

From an advisor perspective to several ultra HNI families and several discussions with them, I realised that the way Life Insurance is perceived by Some of the SUPER RICH families is very different from the rest of the population.

Ultra HNI Clients buy Life Insurance even if they don’t need it NOW! Why?

  1. Liquidity! A lot of Super Rich families are “Asset Rich” but liquid poor. The Life Insurance policy becomes a quick tool to create a liquidity when any key person in the family passes away to ensure Hard Assets are not liquidated in a “Fire Sale“. It also protects the reputation of the family.
  2. Income Replacement. Aren’t the Super Rich have passive incomes and established businesses? Well they do, But when the Primary breadwinner passes away, these income sources may start to dry up, So the Life Insurance provides a quick buffer to help stabilise the income flow.
  3. Wealth Transfer: We all work very hard to build HARD Assets; It is essential that these HARD Assets are transferred to the next generation without loosing value. Taxes, Transfer fees, Probate costs, Lawyers, Trusts, Foundations, the more complex the structure the more fees the estate has to pay. Life Insurance ensures those payments are made without touching any of the assets in the estate. Hence ensuring full Wealth Transfer.
  4. Hedge against the Future: But don’t the SUPER RICH already have a secured future? Well, just like a car, every estate needs to have Shock-Absorbers, Seat Belts and Airbags. You may be in a Rolls Royce, but you would still need the essential protections from uncertainty. Life Insurance is the Shock Absorber in the Estate Value. It hedges the pot holes on the way. Life is unpredictable and so is your estate value.
  5. Life Insurance as an Asset!! Life Insurance is not considered an expense on the Super Rich Income Statement; one of the reasons why a lot of people think the Super Rich don’t have it..It is on the Balance Sheet as an Asset. No wonder a lot of people have the Myth that Life Insurance is only for the Poor and not the Rich. Life Insurance is an option (for all the traders and accountants out there) which is always “in – the – Money” which means; it will always have value for an estate even at its worst performance. Its a Liquid Asset/Property on the Balance Sheet of the SUPER RICH.