High-net-worth individuals (HNIs) in India are increasingly choosing high-value term insurance policies. This shift toward policies valued at Rs 20 crore and above signifies a change in how the affluent manage their financial planning and risk. Rhishabh Garg, Business Head of Term Insurance at Policybazaar, emphasized, “The rising demand for high-value term insurance policies underscores the growing awareness among HNIs.”
In recent years, more HNIs have been selecting term insurance policies valued up to Rs 20 Crore. A recent report by Policybazaar highlights this trend, challenging the belief that online platforms are unsuitable for high-value transactions. It also indicates that Rs 5 crore policies, once deemed substantial, are now becoming standard.
The purchase of such high-value policies is mainly concentrated in major metropolitan areas. The National Capital Region (NCR) and cities like Pune, Hyderabad, and Visakhapatnam have witnessed significant adoption of Rs 20 crore policies. Similarly, Bangalore, Chennai, and Mumbai report purchases of policies valued between Rs 10 to Rs 15 crore.
HNIs in India are categorized into three groups based on their net worth:
- Those holding liquid assets up to Rs 5 crore.
- Individuals with a net worth between Rs 5 crore and Rs 25 crore.
- Those with a net worth above Rs 25 crore.
Many individuals are now customizing their coverage with suitable riders to ensure additional protection.
Customers are increasingly opting for plans with a Special Exit Benefit option over traditional Return of Premium plans, as the former offers similar benefits at a lower cost. There has been a notable increase in the number of female buyers, both working and non-working, taking charge of purchasing term insurance policies.
Despite various investment options, HNIs face several risks and challenges, including:
- Investments in market-linked options are highly sensitive to price movements and volatility.
- Accessing funds quickly can be challenging with illiquid investments like private equity and real estate.
- Unregulated products expose HNIs to potential mismanagement and fraud.
- Investing a significant portion of wealth in a single asset poses risks from unexpected events.
- HNIs are vulnerable to theft or fraud, leading to substantial financial losses.
- Measuring risks and potential returns accurately can be difficult with complex investment options.
- HNIs face complex taxation issues, including estate taxes, capital gains, and gift taxes.
“Term insurance is crucial for everyone with dependents, but even more so for HNIs,” says Garg. “For HNIs, liabilities can be substantial, such as home or car loans that run into crores. They often have significant business obligations and potential high-cost education expenses. HNIs face many risks, including substantial liabilities from properties and personal loans. They may also encounter business continuity challenges where their sudden death could disrupt operations. Market volatility and economic stability can impact their investments, making a term plan with a high cover amount essential,” he explains.