Should HNIs & UHNIs Consider Buying A Term Insurance Plan?

India is increasingly viewed as being on a trajectory toward becoming a global wealth powerhouse. As per estimates, India ranks sixth globally in ultra-high-net-worth individuals (UHNI) population and third in Asia, trailing only China and Japan. Similarly, India is home to over 850,000 high-net-worth individuals (HNIs), and this is projected to double to 1.65 million by 2027.

For this growing class of the rich and the ultra-rich, wealth is often diversified across real estate, market investments, and private businesses. However, this prosperity underscores a critical financial reality: the larger the estate, the greater the need for strategic liquidity in case of the unfortunate death of the person.

In India, an HNI is often classified as an individual with liquid assets between Rs 5-25 crore, while UHNIs are those with a net worth exceeding Rs 25 crore. At this level, it is easy to assume a safety net is redundant and that existing investments may suffice to meet any financial needs. While investments across asset classes are essential for growth, they serve a fundamentally different purpose than term insurance that functions primarily as a tool for succession and estate creation for HNIs and UHNIs.

"In the event of an untimely demise, it is possible that your wealth/investments are trapped in illiquid assets like commercial real estate, business equity, or long-term private equity funds. Having an appropriate amount of term insurance coverage can ensure that one's family can meet various financial obligations, such as business loans, mortgages, or investment-linked borrowing, without depleting the core estate," said Jayanti Jayaram, Vice President - Underwriting, Go Digit Life Insurance.

Without a dedicated payout, one may have to resort to forced liquidation to meet the existing financial obligations or maintain the current lifestyle of the family. It may also lead to distressed sales, where assets may need to be sold well below market value.

Term insurance provides an immediate, tax-free liquid corpus, ensuring the core portfolio remains untouched and continues to compound for the next generation. Unlike market‑linked assets whose realized value fluctuates with prices, interest rates, and cycles, a term life policy pays a contractually defined sum assured upon the insured event, and its payout remains independent of any type of market or macroeconomic conditions.

"For the family of an HNI or UHNI, financial security is less about survival and more about preserving the continuity of a chosen standard of living-higher education of kids abroad, access to high-end healthcare, regular travel, maintaining staff, and continuing philanthropy and other legacy commitments. The aim is to be able to maintain this without the strain of forced asset sales, market timing, or liquidity squeezes during economic shocks," commented Jayanti Jayaram.

"A significant sum assured tailored to your current lifestyle ensures that your dear and near do not have to scale back. This effectively transforms insurance from a simple death benefit into a mechanism for lifestyle sustainability. This protection is further bolstered by the Married Women's Property (MWP) Act, 1874. When a married man purchases a policy under this Act, the proceeds are legally reserved for his wife and children," added Jayanti Jayaram.

A married woman can also purchase the policy for herself and the policy is treated as a trust, ensuring the benefits are shielded from creditors or potential family disputes, making it an essential layer of security for business owners with significant liabilities.

Even for those who are currently single or without dependents, there are strategic reasons to consider coverage early. Purchasing a term plan while younger and healthier secures significantly lower premiums. It is important to secure the policy with a valid nomination as well. For those with high liquid cash flow, many insurers offer limited pay options, allowing the policyholder to complete all premium payments within 10 years or sooner.

"Modern plans also include sophisticated features like the Smart Exit Benefit, which allows policyholders to exit the plan before maturity and receive a 100% refund of all premiums paid. Additionally, add-ons/riders like Accidental Total Permanent Disability (ATPD) are crucial for high earners. An ATPD rider provides a lump sum amount equal to your term insurance sum assured that acts as a buffer, ensuring the family's wealth trajectory remains on track even if the policyholder can no longer work and is disabled after an accident," commented Jayanti Jayaram.

Determining the right coverage often involves the Income Replacement Method, where you can aim for a sum assured varying from 5 to 25 times your annual income, depending upon your current age, while also accounting for outstanding debts and future inflation.
Having an adequate term life cover can ensure that your legacy is defined by the wealth you built, not the liabilities or other obligations left behind. In the world of high-stakes finance, the smartest move is often the simplest: securing an adequate pool of liquidity that stands guard over your life's work.

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