Ensuring Asset Protection for High-Net-Worth Individuals with Life Insurance

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If you are a high net worth individual (HNI) in India, you know how hard it is to protect your assets from various risks and threats. You have worked hard to accumulate your wealth, but you also face many challenges in preserving and transferring it to your loved ones or your business.

Life insurance can be handy in this scenario.

It is one of India’s best asset protection tools for HNIs. Life insurance offers multiple benefits that can help you safeguard your wealth and achieve your objectives. Here are some of the benefits of life insurance for HNIs:

Advantages of Life Insurance for HNIs

1. Tax benefits

One of the most significant advantages of a life insurance plan is that it offers tax benefits at every stage. The premiums you pay for your life insurance policy are tax-exempt under Section 10(10D) of the Income Tax Act, 1961. This means saving up to 42.74% of your income by investing in life insurance.

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Moreover, the death benefits your nominees receive from your life insurance policy are tax-exempt under the same section. This means that your heirs can inherit your wealth without paying any tax on it. This is a huge benefit compared to other taxable investment options that erode your assets’ value.

2. Estate planning

Another benefit is it can help you plan your estate and avoid legal disputes over inheritance. Life insurance can help you create a tax-free legacy for your heirs and ensure they receive your wealth as you wish.

One of the ways to do this is to buy coverage under the Married Women’s Property Act of 1874. This act allows you to create a trust in favour of your wife and children and assign your life insurance policy to this trust. By doing this, you can protect the policy proceeds from creditors and claimants and ensure they are paid only to your wife and children.

Another way to do this is to buy life insurance under a will or a trust. This allows you to specify the beneficiaries and the distribution of the policy proceeds in your will or trust. By doing this, you can avoid the hassles of probate and succession laws and ensure that your heirs receive your wealth per your wishes.

3. Business continuity

If you are a business owner or a partner in a firm, life insurance can help you secure the future of your business in case of your demise. Life insurance can provide financial compensation to your business or your partners in case of the loss of a key person.

4. Wealth creation

Life insurance can also help you grow wealth over time and achieve long-term financial goals. Life insurance can offer you a variety of plans that can suit your needs and preferences.

One of the plans that you can consider is whole life insurance. Whole life insurance is a type of life insurance that provides lifelong coverage and accumulates a cash value over time.

The cash value is the money you can withdraw or borrow from your policy. You can use the cash value for various purposes, such as paying for your children’s education, buying a house or funding your retirement.

Another plan that you can consider is a unit-linked insurance plan (ULIP). ULIP is a type of life insurance that combines insurance and investment. A part of your premium goes towards the policy cover, and the rest is invested in various funds.

Revolving around your risk propensity and return expectations, you can choose from equity, balanced or debt funds. You may also switch between funds as per the market conditions. ULIPs offer you the potential to earn higher returns than traditional insurance plans while providing you with tax benefits and life cover.

Use a life insurance calculator to decide which plan fits your pocket and requirements.

Conclusion

As you can see, life insurance is a powerful tool for asset protection for HNIs in India. It can help you save tax, plan your estate, secure your business and create wealth. However, choosing the right life insurance plan and provider is crucial for achieving your objectives.

You need to consider various factors, such as the coverage amount, the premium amount, the policy term, the fund options, the charges and the claim settlement ratio.