“I have land, gold, and a lot of other investments. The next few generations are taken care off. I do not need life insurance”. How often have we heard of this statement from rich people? And how often have we failed to convey to them the need for life insurance? It is a given fact, in the minds of most agents that High Net Worth Individuals (HNIs) do not need life insurance. Most agents do not even attempt to present the case for life insurance. Let us go back to the basics.

Life Insurance is for future income

The first thing we must believe is that all persons who earn money need life insurance. Why? Because all earning members have a responsibility towards ensuring that their family members must get the advantage of their future likely income in the event of the unfortunate death of the bread earner.

HNIs also have future income

A HNI is no different. No matter how rich a person is, as long as the person wants to earn money (and not lead a retired life), he or she needs life insurance. Life insurance is purchased to protect the future income of a person. This is what Human Life Value tells us.

The Concept of Human Life Value

The current Human Life Value of a person is the discounted value of all future earnings of that person, after deducting the money spent by the person on his own self. So if a person is likely to earn Rs. 1 crore in the remaining part of his or her productive life, and is likely to spend Rs. 25,00,000 on self and also pay 25 lakhs, the taxes of Rs. 25,00,000 , that person’s Human Life Value (in discounted values) to his or her family is Rs. 50,00,000. (Rs. 100,00,000 – Rs. 25,00,000 – Rs. 25,00,000).

If a HNI wants to work and earn money in future….

If a HNI has built a lot of assets and saved a lot of money, this is from his or her past income. If the HNI wants to continue to work and earn more money, this is his or her future income. Life insurance protects the future income not the past income. The past income has already been earned and is invested. It is the future income that needs to be protected, not the past income.

… The HNI Needs Life Insurance …

In case something unfortunate happens to the HNI, the family can get the benefit of the future income that the HNI could have earned had he or she lived, only if the HNI purchases a life insurance policy. Otherwise the family loses the future income altogether.

…Equal to his or her Human Life Value

Hence a HNI needs to purchase a life insurance policy with a sum assured equal to his or her Human Life Value to ensure that his or her family get the benefit of his or her future income, whether the person lives a full life or dies early.