Insurance solutions for HNIs- Balancing investment with coverage – investment avenues
High Net-Worth Individuals (HNIs) are affluent individuals who have high disposable incomes. In the financial parlance, HNIs are classified as people having more than ₹5 crores in investible surplus1. Investible surplus is a technical term that means the extra amount of money that can be invested in ‘appreciating’ assets, i.e., assets whose value grows over time1.
The following assets are excluded from the calculation of investible surplus1 –
1. Property or real estate
2. Vehicles
3. Personal assets
4. Assets purchased without expecting to earn any return from them
There are many HNIs in India. Per reports, as of 2022, there were 797,714 HNIs in India2 having assets worth more than $1 million. The report also projected that the number of HNIs would double in the coming 5 years growing at 108% to reach the 1.7 million mark2.
HNIs And Investments
When it comes to investing and planning their portfolios, HNIs usually look for customized solutions to meet their unique investment needs. They can spend more and don’t mind investing in a product that is tailor-made for their particular requirements. That may be why they consider investing in alternative investment avenues like Alternative Investment Funds (AIFs), Portfolio Management Services (PMS), etc.
While there are many investment avenues that can be customized based on an HNI's unique requirements, what about the financial security that insurance brings?
Insurance Solutions for HNIs
Life insurance is important for HNIs too as they also want to provide financial security to their families in their absence. Moreover, they can easily plan for their specific goals using the life insurance plans available in the market. Let’s understand how –
1. Different types of plans
There are different types of life insurance plans that HNIs can choose from based on their coverage needs. Have a look –
Type of plan |
Goal fulfilled |
Income protection and replacement |
|
Endowment and Money-Back Plans |
Savings and wealth creation |
Child Insurance Plans |
Securing a child’s financial future |
Pension Plans |
Retirement planning |
Savings and wealth creation |
HNIs can, thus, explore these plans and choose suitable policies which cater to their financial goals.
2. Flexibility of choosing the coverage
Life insurance plans offer flexibility in choosing the policy tenure and the sum assured. As such, like any other individual, HNIs too can choose a coverage amount which would be sufficient to take care of their financial goals. Moreover, with a flexible choice of tenure, they can choose a tenure that aligns with the horizon of goal fulfilment.
3. Optional riders
Riders are additional coverage features which are usually offered as optional benefits at the payment of an additional premium. Depending on their added coverage needs, HNIs can choose the relevant riders and enhance the scope of their policies.
4. Choice of premium payment terms
Even when it comes to premium payments, life insurance plans offer flexible options of regular premiums, single premiums and limited premiums. This makes it easier for HNIs to choose a suitable premium payment term based on their financial plan and enjoy the coverage.
So, life insurance plans offer customisation which suits individual HNI needs and helps such individuals avail of relevant coverage.
Savings-Oriented Insurance Plans – Balancing Investment With Coverage
For HNIs looking for investment returns, savings-oriented life insurance plans can be a suitable choice. Traditional plans like endowment and money-back offer stable returns and are immune to market risks. On the other hand, for risk-taking individuals, ULIPs may be a suitable choice as they offer market-linked returns and allow wealth creation with insurance coverage.
Some of the benefits of both traditional plans and ULIPs are enumerated below –
Traditional life insurance plans (endowment and money back) |
ULIPs |
1. Stable benefits are payable on premature demise or on maturity. 2. Some plans offer bonus additions which add to the corpus. 3. Some plans also offer guaranteed additions, loyalty benefits, etc. to enhance the plan benefits |
1. ULIPs offer HNIs different types of investment funds. HNIs can choose one or more funds depending on their risk profile and investment strategy. 2. The funds are professionally managed and offer a diversified portfolio of securities. 3. HNIs can earn market-linked returns on their investments 4. ULIPs offer the flexibility of partial withdrawals, switching between the available funds and premium redirections. 5. HNIs can also use the top-up facility if they want to invest more. 6. Goal-oriented ULIPs like child ULIPs or pension ULIPs help in planning for the relevant goals. |
The bottom line
HNIs looking for customized solutions in life insurance plans may consider ULIPs. Right from choosing the type of policy to nuances of the coverage details, HNIs have complete control of their policies. If they choose savings-oriented life insurance plans, they can enjoy the dual benefits of insurance coverage and investment returns.
It is a win-win situation which HNIs can capitalize on. So, if you are an HNI, assess your needs and choose the relevant life insurance plan. Customise the coverage when buying the policy and enjoy financial security.
Reference
1.https://www.business-standard.com/about/who-is-high-net-worth-individuals
2.https://www.businessinsider.in/business/news/indias-super-rich-will-double-in-numbers-to-1-6-million-by-2027-knight-frank/articleshow/100298454.cms
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