High net worth? What cover is right for me?

Do High Net Worth individuals require life insurance? Often, yes. Keep reading our guide to find out more about Inheritance Tax Planning, Family Protection and Gift Inter Vivos policies.

Most high-net-worth individuals have assets which could result in an inheritance tax (IHT) liability if they pass away. Often a whole-of-life policy can be a cost-effective and straightforward answer to the problem and is relatively easy to set up.

Do you want to gift part of your estate to your beneficiaries immediately?

Firstly you will be able to see them enjoy the benefits and secondly, this will reduce your estate for the purposes of IHT. However, there is a potential IHT liability on the gift during the first 7 years that follow the gift. The liability receives tapered relief and will reduce over time.

A Gift Inter Vivos life insurance policy covers a 7-year term and only applies once the nil rate band has been exceeded via gifts. The initial sum assured matches the tax liability and reduces over the term as the liability tapers. This is often the most cost-effective policy to ensure funds are available to cover an IHT bill. The levels and bases of taxation, and reliefs from taxation, can change at any time.

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Gift inter vivos
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Family Protection

People with families will understand the need to purchase protection for children or spouses. With estates often tied up in investments, it can take time for them to be liquefied, meaning life insurance is needed. We recommend such policies are placed in Trust as this will mean swift payment to the beneficiaries and avoid any potential IHT liability. Trusts are not regulated by the Financial Conduct Authority.

  • Many High Net Worth clients may partake in unusual sports or past times. These can range from any form of motor sport to mountaineering or expeditions. It is essential that these past times are properly disclosed to any life insurance company to ensure the cover is not affected.

  • Although you might have private medical insurance or access to personal physicians, would it still be helpful to have a lump sum to just simply provide breathing space and make sure there are no financial issues?  You should consider a Critical Illness policy as this leaves you free to focus on the illness and getting better.

  • This is not often an issue as income is sustainable with little or no influence. If you are required to work for your income then an Income Protection policy is an area you should consider.