Is Buying Life Insurance a Good Investment for Wealthy Individuals?

Most people buy life insurance plans so that their loved ones get a tax-free lump sum amount to pay off any pending financial liabilities and secure their future. However, this no way implies that life insurance plans are only for people who do not have that money saved. Even if you have a high annual income or high net worth, you can still avail of the benefits of life insurance. In fact, for a wealthy individual, life insurance can be a great tool to protect your inheritance and support your family.

Why are life insurance plans a good investment for wealthy individuals?

1. Tax laws favour life insurance plans: Among the many other benefits of life insurance, the top most is that the family life insurance plans enjoy tax exemption under the prevailing tax laws. As per tax laws, life insurance plan premiums and proceeds get tax benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961, respectively. This means that the premiums you pay have tax benefits, while the proceeds your family or the beneficiary get are also tax-exempt.

This is highly advantageous for you since you can maximise your after-tax estate/inheritance and have more money to pass on to your heirs. Moreover, since your heirs are not required to pay any taxes on the benefit from life insurance plans, it is a win-win from both ends.

2. Uncertain future: You might have substantial savings to be able to self-insure yourself and your family. However, it is unwise to think that because you are living comfortably in the present, you will not need any financial protection in the future. The future is uncertain, and your responsibilities change with each life stage.

Today, you might have enough to leave your spouse enough financial support or pay for your child’s education expenses. But over time, taxes, inflation and rising consumer prices could significantly decrease the inheritance your loved ones receive upon your death. Since life insurance proceeds are exempt from taxes and offer substantial protection against the worst-case scenarios, family life insurance plans could serve as an ideal inheritance for your family.

3. Grow your money: You might be wealthy now and have sufficient to provide for your family in the present and even in the future. But the times are changing, and every day the value of money diminishes. Inflation is eroding even years of savings. In such cases, you do not want your family to have only a limited financial sum to meet their living expenses. With a life insurance plan, you can grow your wealth and achieve returns that can help your loved ones combat the impact of inflation in the long run.

4. Alternate source of income: In the case of your unfortunate demise, your family will lose a major source of income. Even if you leave a legacy, inheritance or lump sum corpus for their financial security, none of those can replace the value of a regular stream of income. If you are covered under a group life insurance policy, the benefits are extended to your family members and you can opt to create a regular income for your family in the case of the loss of your income. This will help them meet their everyday living expenses without affecting their corpus, which can eventually support their long-term financial goals.

5. Rising medical expenses: One of the major concerns for everyone – wealthy, average or below average income families, is the steeply rising medical expenses. Moreover, uncertainties like the COVID-19 pandemic can further cause huge financial stress, irrespective of your income or your wealth corpus. Medical expenses could erode even years of your savings and cause the family to struggle financially. However, by choosing from among suitable family life insurance plans, you can ensure your family’s future sustainability.

Even if you are wealthy enough or confident that your beneficiaries will not need a death benefit, life insurance plans can act as a solid financial cushion for your family and their finances for uncertainties ahead. You can check out our life insurance plans online on our website!

Know more about term plan, term insurance and savings plan at PNB MetLife.