The PPP - High Net Worth

High Net Worth

Kathryn and Matt Rann are this time talking about high net worth protection insurance, and how underwriting might be different to a normal application. 

High net worth protection insurance can be quite unique, and often an insurer might have a dedicated team who will deal with these types of policies. A high net worth policy or ‘large case’ as some might call it tends to be arranged by a protection insurance adviser. These policies can be anything from around £1 million upwards.

In Matt’s experience, these terms are usually used by those who might have a ‘high net worth client’. What exactly is meant by that can vary, but it can usually be a person with a net worth of around £2 million or is earning in excess of £200,000 per year. It might be that these clients don’t require a large amount of life insurance, so being a high net worth client doesn’t exactly mean that their policy will be a high net worth protection insurance policy.

When applying for protection insurance, even if it’s not a very large amount of cover, the insurer will want to know that there’s insurable interest. Kathryn gives an example of a person earning £20,000 per year with a mortgage no higher than £200,000 but wanting £3 million cover. From an adviser’s point of view, they really will need to look into why this person needs so much cover and if that amount would be suitable to their needs. Insurers work from guidelines and will usually only offer what they believe to be a reasonable amount of cover, which is often calculated by a particular multiple of salary. Now, if this person was able to explain why they needed so much cover and there would be a loss from their death, the underwriters might then think outside of the box and potentially offer the cover that has been requested. It’s all about having a real need for the insurance being applied for.

Some chose to take our protection insurance policies to help deal with inheritance tax, and Matt explains what might happen in this instance. There are times with high net worth policies where third party evidence such as a tax adviser or an accountant is needed, as extra clarification that the sum assured really is necessary. Accountants are likely to be involved too where there is a need for shareholder protection, as this is normally outside the normal tasks and comfortable abilities of a protection insurance adviser. 

Matt also talks about the normal policies he would come across whilst working as an underwriter, who are taking out the policies for inheritance tax or gift inter vivos purposes.

There are actually protection insurance advisers who will deal specifically with high net worth policies or high net worth clients, which makes you think about how many there must actually be for that to be their speciality. When it does come to high net worth policies or clients, usually the client will have high expectations of the application and underwriting process, which is why people will dedicate their time to ensuring these run smoothly.

Having a high net worth policy in place is a prime example of when a trust really should be used, and there are even some protection insurance advisers who won’t arrange a policy unless there will be a trust in place.

To catch what else Kathryn and Matt discussed, you can listen to this episode below or on the Practical Protection Podcast website.

Remember, if you have listened to this as part of your work, you can claim a CPD certificate on the website, thanks to the podcasts sponsors Octo Members.

If you would like to know more about how to arrange protection insurance, take a look at Kathryn’s Protection Insurance in Practice course.

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