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India's wealthy opt for term insurance policies worth Rs 5-20 crore: Report

The growing preference for policies worth Rs 20 crore and beyond indicates a change in financial planning and risk management among the affluent

Life insurance industry, insurers, health insurance, insurance sector

Illustration: Ajay Mohanty

Surbhi Gloria Singh New Delhi

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High-net-worth individuals (HNIs) in India are increasingly opting for high-value term insurance policies. This growing preference for policies worth Rs 20 crore and beyond indicates a change in financial planning and risk management among the affluent.

Rhishabh Garg, Business Head of Term Insurance at Policybazaar, said, “The increasing demand for high-value term insurance policies highlights the importance of growing awareness among HNIs"

In recent years, more HNIs have been opting for term insurance policies valued up to Rs 20 Crore. A recent report by Policybazaar highlights this shift, countering the conventional belief that online platforms are unsuitable for high-value transactions. It also indicates that Rs 5 crore policies, once considered substantial, are now becoming commonplace.
 

The purchase of such high-value policies is primarily concentrated in major metropolitan areas. The National Capital Region (NCR) and cities like Pune, Hyderabad, and Visakhapatnam have seen significant uptake in Rs 20 crore policies. Similarly, Bangalore, Chennai, and Mumbai report purchases of policies valued between Rs 10 to Rs 15 crore.

Who are the high-net-worth individuals in India?

HNIs in India are classified into three categories based on their net worth:

High net worth individuals (HNWIs): Those holding liquid assets up to Rs 5 crore.

Very high net worth individuals (VHNWIs): Individuals with a net worth between Rs 5 crore and Rs 25 crore.

Ultra high net worth individuals (UHNWIs): Those with a net worth above Rs 25 crore.

New trends in the buying behaviour of HNIs:

Customised coverage: Many individuals now customise their coverage with suitable riders to ensure additional protection.

Special exit benefit plans: Customers are increasingly choosing plans with a Special Exit Benefit option over traditional Return of Premium plans, as the former offers similar benefits at a lower cost.

Female buyers: There has been a remarkable increase in the number of female buyers, both working and non-working, taking charge of purchasing term insurance policies.

What challenges do HNIs face?

Despite various investment options, HNIs encounter several risks and challenges, including:

Market risk: Investments in market-linked options are highly sensitive to price movements and volatility.

Liquidity risk: Accessing funds quickly can be challenging with illiquid investments like private equity and real estate.

Regulatory risk: Unregulated products expose HNIs to potential mismanagement and fraud.

Concentration risk: Investing a significant portion of wealth in a single asset poses risks from unexpected events.

Operational risk: HNIs are vulnerable to theft or fraud, leading to substantial financial losses.

Complexity: Measuring risks and potential returns accurately can be difficult with complex investment options.

Taxation: 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.

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First Published: Jul 03 2024 | 5:40 PM IST

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