Life insurance for high net worth applicants

Do high-net-worth individuals need life insurance?

When you’ve built considerable wealth, life insurance might not seem like a priority. But for high-net-worth individuals (HNWI), it can be a smart planning tool — one that helps you manage taxes, support your heirs and keep your overall financial picture intact.

Without proper planning, estate taxes can take a sizable chunk out of what you leave behind. At the federal level in 2025, estates above $13.99 million may be taxed up to the maximum of 40 percent — and some states impose their own estate or inheritance taxes, too. A life insurance policy can offer a straightforward way to help cover those costs, so your heirs don’t have to scramble to sell assets or take on debt.

There are other important reasons life insurance could be worth considering:

• Market risk protection: A policy can provide guaranteed funds during market downturns — especially useful if much of your wealth is tied up in investments or illiquid, like real estate.
• Business planning: Many business owners use life insurance to fund buy-sell agreements, helping ensure a smooth transition if a partner or key stakeholder dies.
• Family business succession: Policy proceeds can keep the business in the family while providing liquidity for taxes or income support.
• Access to cash: Permanent policies can build value over time, which can be tapped for various needs or used strategically for estate planning.

Specifically, succession planning and buy-sell agreements work well together. Milan notes, “Permanent life insurance can be used to fund succession planning in a tax-efficient manner, utilizing the cash value built up over time to pay for some or all of the buyout cost.”

Ultimately, life insurance for HNWIs isn’t just about protecting what you’ve built — it’s about putting the right tools in place to transfer it smoothly, tax-efficiently and on your terms.

Life insurance strategies if you have a high net worth

Once the need for life insurance is clear, the next step is understanding how to use it strategically. For high-net-worth individuals, policies can serve a number of advanced planning purposes — from smoothing business succession to reducing estate tax exposure. The right strategy often depends on your specific goals, your assets and how you plan to pass them on.

Life insurance for business owners

For business owners, life insurance often plays a dual role: protection and planning. If you're a key decision-maker or revenue driver, your absence could disrupt operations or even jeopardize the company’s future. A life insurance policy helps ensure the business has the liquidity it needs to stay afloat during that transition.

Sturgeon adds that life insurance becomes even more important when ownership or succession gets complicated — such as when some children are involved in the business and others are not. “Life insurance can serve as a great tool to ensure that when you pass away, your estate has ample liquidity to ensure any children that may not want an equity interest in your business can still receive an equivalent inheritance to that of their siblings,” he explains.

Additionally, policies are often used to fund buy-sell agreements, which outline how ownership will be transferred if a business partner passes away. These agreements help avoid conflict and make transitions more predictable.

Life insurance for estate planning

For individuals with estates that exceed the federal exemption threshold — $13.99 million per individual, or roughly $28 million for married couples in 2025 — life insurance can help reduce the impact of estate taxes. Without proper planning, a large portion of the estate could be taxed heavily.

This is where irrevocable life insurance trusts (ILITs) often come into play. “Families can use what's called an ILIT to set up a trust whose limited purpose is to hold a life insurance policy on a family member, then pay out the proceeds from that policy when the policy owner dies to pay some or all of the estate tax,” says Sturgeon.

By moving the policy outside the taxable estate, an ILIT ensures the death benefit goes directly to the trust beneficiaries — typically family members — without being reduced by estate taxes. This strategy can be useful for those who live in states with lower exemption limits or who expect future growth to push them above federal thresholds. ILITs are often complex and you may find it beneficial to work with a qualified estate planning attorney for its creation and management.

Life insurance for retirement planning

In addition to protection and estate planning, permanent life insurance — like whole or universal life — typically offers a long-term planning benefit: cash value accumulation. Over time, this feature allows policyholders to access tax-deferred funds via loans or withdrawals, which can be used strategically during retirement or to manage cash flow.

This approach isn’t for everyone, and Sturgeon notes that selecting the right strategy should depend on the bigger picture. “It really depends on the situation of the individual or family and what they're trying to achieve,” he says. “Just as important as knowing when to use life insurance for planning purposes is knowing when it's not applicable or runs counter to what the client is trying to do.”

Life insurance for charitable giving

Some high-net-worth individuals explore life insurance as a vehicle for philanthropy by naming a nonprofit as a policy beneficiary. This can allow you to make a sizable future gift without immediately impacting your liquidity. However, Sturgeon cautions that it’s not always the most efficient route.

While it may be a fit for some, charitable giving strategies often require a more customized approach — and may benefit from other financial vehicles better suited to long-term tax or giving goals, such as a charitable trust.

Types of life insurance for high-net-worth applicants

When it comes to life insurance, high-net-worth individuals typically have more complex needs — and more financial flexibility. The right type of policy depends on your financial goals, how long you need coverage and whether you're using the policy for protection, estate planning or wealth transfer.

Most policies fall into two main categories: term and permanent.

• Term life insurance is designed to provide coverage for a specific period — often 10, 20 or 30 years. It’s generally more affordable and works well when you need finite protection, such as covering a mortgage, replacing income or funding a buy-sell agreement.
• Permanent life insurance, on the other hand, offers lifetime coverage (typically lasting up to a maximum age range of 95 to 121) along with a cash value component. While the premiums are higher, these policies can support more advanced planning strategies, like building liquidity for estate taxes or supplementing retirement income.

Here’s a side-by-side comparison of how term and permanent life insurance stack up for high-net-worth individuals:

If you’re unsure which option fits best, working with a financial advisor or estate planning professional can help you weigh the trade-offs and structure your policy to support your broader goals.

Applying for life insurance as a high-net-worth applicant

Applying for life insurance as a high-net-worth individual can look a bit different than the standard process. While the core steps are the same — choosing a policy, going through underwriting and naming beneficiaries — the scale and complexity of the policy often lead to more scrutiny during the application.

If you’re applying for a large death benefit, expect both your health and your finances to be under the microscope.

Here are a few things to keep in mind as you move through the process:

• Medical review: Most high-value policies require a medical exam and a review of your health history. Pre-existing conditions, medications and even family medical history can all affect your approval and rates.
• You may need to provide financial documentation: Insurers want to verify your income, net worth and existing assets to confirm there’s a legitimate financial need for the policy amount. This may include tax returns, investment statements or business financials.
• Work with experienced professionals: Advisors who understand high-net-worth planning can help ensure your policy is structured appropriately — especially if you’re using it for estate planning, business succession or trust ownership.
• Policy structure matters: You’ll need to decide between term or permanent coverage — or a mix of both — based on your long-term goals. If the policy is intended to fund estate taxes or pass wealth to heirs, permanent coverage may make the most sense.
• Designate your beneficiaries clearly: Whether you're naming family members, business partners or a trust, be sure your documentation is up to date and aligns with your broader estate plan.

While the process may involve more steps, the added diligence helps ensure your policy is right-sized and aligned with your long-term financial strategy.

Consider working with an experienced life insurance agent, insurance consultant or Chartered Life Underwriter when planning for life insurance as a high-net-worth individual. These policies should be carefully monitored on a regular basis to ensure they are working as intended.

Frequently asked questions