By Vansh Agarwal
For high-net-worth individuals (HNIs), term insurance is not just about income replacement. It is about ensuring financial continuity and protecting a lifestyle that has taken years to build.
Many insurers now offer a Return of Premium (ROP) option, under which all premiums paid are refunded at the end of the policy term if no claim is made. This addresses the long-standing concern among affluent customers who prefer not to see premiums as a sunk cost.
A term plan offers immediate, tax-free liquidity, allowing families to meet short-term needs without distress sales. The right sum assured should not be seen as a number on a policy document. It should represent your earnings, liabilities, aspirations, and the standard of living your family maintains.
New-age advantage
Some plans also allow flexible payout structures, where the family can receive part of the benefit as a lump sum and the rest as regular income. Features like increasing cover options ensure that the sum assured rises annually to match inflation and lifestyle upgrades, providing dynamic protection that evolves with your life stage. Large covers are not as expensive as many imagine. For instance, a 35-year-old non-smoker salaried individual can secure a Rs 10 crore term cover for around Rs 6,000 per month.
Thumb rule
A simple thumb rule is to opt for a cover worth at least 15 times your annual income. However, HNIs often need to look beyond this multiplier. Their financial lives are more complex, with multiple obligations ranging from high-value loans and children’s overseas education to business exposure and lifestyle costs.
Consider a salaried professional in Bengaluru earning Rs 50 lakh annually, with household expenses of Rs 20 lakh and an outstanding home loan of Rs 1.5 crore. Accounting for inflation and future goals, a term cover of Rs 7-8 crore would be suitable. This ensures that in the event of an untimely demise, the family can meet all major commitments without disruption.
For a self-employed business owner in Delhi earning Rs 75 lakh annually, with a Rs 2.5 crore home loan and higher lifestyle costs, a term cover of Rs 10-12 crore would be ideal. Business income is often cyclical and depends on market conditions, making an adequate term plan essential to preserve financial stability and independence for dependents.
Estate planning
It also serves as a vital estate planning tool. The payout can be used to settle loans, pay taxes, or fund inheritances without fragmenting core assets. For business owners, it ensures continuity by providing funds to meet financial obligations or support succession planning.
With digital platforms and simplified underwriting processes, obtaining a high-value term cover has become easier. This, coupled with flexibility, tax benefits and the recent GST cut, makes term insurance one of the most prudent components of an HNI’s financial portfolio.
The writer is head, Term Insurance, Policybazaar