• Skip to primary navigation
  • Skip to main content
Good Financial Cents®
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
  • Make Money
    • Get Money Now
      • Ultimate Guide to Making Money
      • Need Money Now
      • Get Free Money Fast
      • Make Money Fast
      • Make $1K Per Month
      • Make $100 Per Day
    • Control Your Destiny
      • Self Employed Jobs
      • Make Money from Home
      • Hobbies That Make Money
      • How to Become a Freelance Writer
      • Small Business Ideas to Start
      • How to Become an Independent Contractor
      • Best Online Jobs
    • Passive Income
      • Passive Income Ideas
      • Multiple Streams of Income
      • Extra Income
      • Residual Income Ideas
      • Learn to Sell e-Books
      • Make Money on Facebook
      • Make Money on Tiktok
      • Best Online Survey Sites to Make Money
    • Explore More
      • Best Side Hustle Ideas
      • Make Money for Teens
      • Best Online Colleges
      • Best Jobs No College Degree
      • Become a Millionaire
      • Careers for the Future
  • Manage Money
    • Best Of
      • Budgeting Tools
      • Personal Finance Software
      • Best Cashback Cards
    • Company Reviews
      • Personal Capital vs Mint
      • Personal Capital Review
      • SmartAsset Review
    • Guides
      • Buy or Lease a Car
      • What is Liquid Net Worth?
      • Setting Financial Goals
      • How to Budget
      • Ways to Save Money
    • Explore More
      • How Much Car Can I Afford?
      • Best Auto Refinance Companies
  • Invest
    • Best Of
      • Best Short and Long-Term Investments
      • Best Low Risk Investments
      • Best Online Stock Brokers
      • Best Crypto Exchanges
      • Best Short Term Investments
      • Best Long Term Investments
      • Best Trading Platforms
      • Best Investment Apps
    • Company Reviews
      • Lending Club
      • Robinhood
      • M1 Finance
      • Ally
      • TD Ameritrade
      • Fundrise
      • Betterment
      • Etrade
      • Wealthfront
    • Guides
      • Investing for Beginners
      • Investing Small Amounts of Money
      • Investing in Real Estate
      • No Money Down Real Estate
      • Bonds vs Stocks
      • Peer to Peer Lending
      • Best Hedges Against Inflation
      • Safe Bitcoin Investing in 2023
    • Explore More
      • Bitcoin vs. Real Estate
      • Betterment vs Wealthfront
      • Investing for College Students
      • Stock Market Alternatives
    • By Investment Amount
      • How to Invest $100
      • How to Invest $1K
      • How to Invest $2k-$3k
      • How to Invest $5K
      • How to Invest $10K
      • How to Invest $15k
      • How to Invest $20K
      • How to Invest $30k
      • How to Invest $50K
      • How to Invest $100K
      • How to Invest $200K
      • How to Invest $500K
      • How to Invest $1M
  • Taxes
    • Best Of
      • Best Tax Relief Companies
      • Best Tax Software
    • Guides
      • Federal Income Tax Guide 2023
      • Taxes and Cryptocurrency
      • How to Do Your Own Taxes
      • How to Invest Your Tax Refund
      • Hiring a Professional Tax Preparer
      • Tax Tips for Freelancers
    • Company Reviews
      • TurboTax Review
      • H&R Block Review
      • Taxslayer
      • Tax Act
  • Insurance
    • Best Of
      • Best Life Insurance
      • Best Home Insurance
      • Best Auto Insurance
      • Cheap Term Life Insurance
      • Car Insurance For Young Adults
    • Guides
      • Term vs Whole Life
      • Different Types of Car Insurance
      • Average Cost of Car Insurance
    • Explore More
      • Life Insurance Over 50
      • Life Insurance Over 80
      • $1 Million Life Insurance
      • $2 Million Life Insurance
      • $3 Million Life Insurance
    • Company Reviews
      • Banner Life Insurance
      • Ladder Life Insurance
      • Health IQ
      • Haven Life
      • Policygenius
      • State Farm Auto Insurance Review
  • Retirement
    • Roth IRA
      • Best Places to Open a Roth IRA
      • Best Investments for Roth IRA
      • 7 Roth IRA Secrets
      • Roth IRA Conversion Guide
      • Roth IRA Rules
      • Roth IRA vs Roth 401k
      • Are Roth IRA Contributions Tax Deductible?
    • 401(k)
      • 401(k) Limits
      • 401(k) to Roth Rollover
      • Is 401(k) Enough for Retirement?
      • Maxed Out 401(k): What's next?
    • Traditional IRA
      • Traditional IRA Rules and Limits
      • Traditional IRA vs. 401(k)
      • Simple IRA Rules
      • SEP IRA Rules
      • How Much Do You Need to Start an IRA?
    • Explore More
      • SEP IRA vs. Roth IRA
      • 457 Plan for Successful Retirement
      • 401a Rollover Rules
      • How to Retire at 50
      • How to Retire at 55
  • Banking
    • Best Of
      • Best National Banks
      • Best High-Yield Savings Accounts
      • Best Checking Accounts
      • Best Savings Accounts
      • Best CD Rates
      • Best Money Market Accounts
    • Company Reviews
      • BBVA
      • Synchrony
      • Wells Fargo
    • Explore More
      • 9 Banking Alternatives for 2023
      • What is a Credit Union?
  • Home
    • Best Of
      • Best Mortgage Lenders
      • Best Mortgage Refinance Companies
      • Best Home Warranties
      • Best Homeowners Insurance
      • Best VA Loans
      • Best Mortgage Rates
      • Best Moving Companies
      • Best Home Security
    • Guides
      • Home Buying Checklist
      • Online Home Appraisal
      • How Much House Can I Afford?
      • First-time Homebuyer Programs
      • How to Get Approved for a Home Loan
      • Save Money When Building a House
      • How to Save for a Downpayment
      • When to Refinance Your Mortgage
    • Explore More
      • 15 vs. 30-year Mortgage
      • Home Warranty vs. Home Insurance
      • Veterans United Home Loan Review
      • Quicken Loans Review
      • HELOC vs Second Mortgage
      • DCU Mortgage Review
      • Costco Mortgage Program Review
      • USAA Mortgage Loan Review
  • Credit
    • Best Of
      • Best Credit Repair Companies
      • Best ID Theft Protection Services
      • Best Credit Report Options
      • Best Bad Credit Loans
    • Guides
      • How to Build Your Credit Score
      • How to Raise Your Credit Score in 5 Months
      • How to Dispute Your Credit Report
      • Hot to Remove Collections from Your Credit Reports
      • How Identity Theft Destroys Your Credit Score
    • Explore More
      • What is a Good Credit Score?
      • What is a Bad Credit Score?
  • Debt
    • Best Of
      • Best Debt Consolidation Loans
      • Best Personal Loans
      • Best Student Loans
      • Best Student Loan Refinance
    • Guides
      • What is Debt Consolidation?
      • How to Get Out of Debt
      • How to Get a Personal Loan Approved
      • How to Pay Off Student Loans Faster
      • Should I Consolidate My Debts?
      • Should I File for Bankruptcy?
    • Company Reviews
      • Credible
      • Sofi

Should High Net Worth People Buy Life Insurance or Self-Insure?

https://www.goodfinancialcents.com/wp-content/uploads/2019/07/MG_5503-150x150.jpg
  • Written By:
    Jeff Rose, CFP®

    Jeff Rose, CFP®

    Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance...

    Read More
  • Updated: September 1, 2021
  • 6 Min Read
  • Advertising Disclosure

    Advertising Disclosure

    GoodFinancialCents® has an advertising relationship with the companies included on this page. All of our content is based on objective analysis, and the opinions are our own. For more information, please check out our full disclaimer and complete list of partners.

Quality Verified THE GFC® PROMISE
shield check icon
Quality Verified

GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.

These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.

Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.

Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.

shield check icon
Why You Can Trust GoodFinancialCents®

GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.

These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.

Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.

Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.

It’s probably not unusual for people with high net worth to assume they don’t need life insurance.

After all, when you have a certain amount of money, you might consider yourself essentially self-insured.

But self-insurance is no insurance.

That can be true even for high net worth individuals.

People with high net worth usually also have high living expenses and high debts.

Even a large estate can be drained in surprisingly little time in the absence of a family’s primary income earner.

Why Is Life Insurance Important For People With High Net Worth?

That’s why life insurance for people with high net worth is much more important than commonly assumed.

What are some of the reasons?

To Pay Final Expenses and Uncovered Medical Expenses

The average funeral cost is more than $8,700.

But, for high net worth individuals, that figure could be several times higher.

That may be fairly easy to manage if you leave an estate with $1 million or more in financial assets.

But medical costs may be a different story.

Sure, health insurance policies have fixed deductibles and out-of-pocket maximums.

But a situation involving a prolonged terminal illness, one that goes on for a year or more, could result in much higher direct costs.

It’s not uncommon for experimental procedures and treatments to be administered to a terminal patient.

Then there’s the matter of extended nursing care.

Did you know the current cost of a nursing home exceeds $100,000, or over $8,000 per month?

With certain types of terminal illness, you could be in a nursing facility for a year or more.

That will result in a six-figure outlay that may be no better than partially covered by medical insurance.

Even with good health insurance or a long term care insurance plan, you can still end up with six figures in uncovered medical expenses, plus funeral costs.

If your financial assets are between $500,000 and, say, $2 million, that could leave your loved ones with substantially less money.

A life insurance policy would cover these costs, leaving your entire estate to your family.

To Pay Estate Taxes

Historically, estate taxes are one of the primary reasons high net worth people have life insurance.

Estate taxes can take a big chunk out of your assets, which would leave less to your heirs.

The federal estate tax threshold is high at $11.4million for 2019, up from $11,180,000 in 2018. That’s a fairly substantial increase.

But just as the federal threshold can increase, it can also decrease.

That decrease can happen if the government is looking to increase tax revenues to plug a hole in future budget deficits.

It’s generally more politically popular – and less risky – to raise taxes on the rich than to enact increases that will affect the general population.

The federal estate tax isn’t the only one you have to be concerned with.

At least a dozen states have estate tax thresholds that are well below the federal limit.

For example, both Massachusetts and Oregon impose estate taxes on estates valued at more than $1 million.

There’s another catch when it comes to the estate tax, and it applies to both federal and state taxes.

For estate tax purposes, your estate is your entire asset base, not just financial assets like certificates of deposit, stocks, and brokerage accounts.

Other assets included in your estate are:

  • Retirement savings
  • Life insurance proceeds
  • Personal residence
  • Second homes and timeshares
  • Investment property
  • Business interests
  • Intangible assets (patents, copyrights, etc.)
  • Personal property, like furniture, entertainment equipment, jewelry, artwork, and antiques

These assets still may not push you into the range of the federal estate tax.

But millions of people are worth more than the $1 million or $2 million it will take to trigger the tax at the state level.

Ads by Money. We may be compensated if you click this ad.AdAds by Money disclaimer
With a Life Insurance policy you can take care of your family the right way.
Should anything happen to you, you'll want to leave your loved ones a financial nest egg for their wellbeing. Click on your state to find out more.
HawaiiAlaskaFloridaSouth CarolinaGeorgiaAlabamaNorth CarolinaTennesseeRIRhode IslandCTConnecticutMAMassachusettsMaineNHNew HampshireVTVermontNew YorkNJNew JerseyDEDelawareMDMarylandWest VirginiaOhioMichiganArizonaNevadaUtahColoradoNew MexicoSouth DakotaIowaIndianaIllinoisMinnesotaWisconsinMissouriLouisianaVirginiaDCWashington DCIdahoCaliforniaNorth DakotaWashingtonOregonMontanaWyomingNebraskaKansasOklahomaPennsylvaniaKentuckyMississippiArkansasTexas
See An Estimate

To Pay Off Personal Debts 

It’s not uncommon even for high net worth individuals to underestimate the amount of debt they have.

For example, if your gross estate value is $3 million but you owe $1.5 million in various loans, your loved ones could be forced to liquidate much of your estate to settle those debts.

The problem is once you’re gone, your estate may remain, but your income will go with you.

Though you may be able to comfortably afford your current debts, your family might not be able to do the same without your income.

What’s more, the inability to service those debts could result in your family liquidating assets at less than fair market value.

It’s the kind of thing that happens when bills are piling up and money is short.

Still another possibility is your family attempting to retain the assets securing those debts.

In an effort to do so, they may drain down liquid and financial assets.

As they do, their ability to sustain themselves, as well as to draw income from those assets, will gradually decline.

Eventually, they could be left broke – while still owning indebted physical assets they will no longer be able to carry.

This is often how even very large estates are lost forever.

To Pay Off Business Debts 

A lot of high net worth individuals have substantial business interests.

But along with business interests come business debts.

Once again, those debts might be easily serviced while you’re alive and running your business.

But your death may result in a decline in gross business income, which will leave less cash flow to pay debts.

And of course, just because you’re gone doesn’t mean the debts will go away.

One of the primary reasons why high net worth individuals have life insurance at all is because of business debt.

Often, the family isn’t connected with the business and won’t be able to maintain it after your death.

The debts will still be there, needing to be either serviced or paid off completely.

Enter life insurance, which can provide the coverage your family needs. 

Still another consideration is the possibility (or even the likelihood) that your business debts carry your personal guarantee.

That being the case, your business debts will extend to your personal estate.

Life insurance for the purpose of paying business debts may not enable your family to continue operating the business indefinitely.

But it will buy them time to sell the business or shut it down absent the need to pay off business-related debt.

To Provide for Loved Ones in the Manner to Which They’re Accustomed 

If you live to a ripe old age, when it’s just you and your spouse living off retirement income and the investment income from your financial assets, life insurance may not be that important.

Much or most of the income will continue flowing to your spouse even after your death.

But it’s different if you have a dependent family, particularly children, and a nonworking spouse.

Since you’re a high net worth individual, you probably also have a high income.

That money will certainly disappear upon your death.

But your family’s living expenses won’t.

For example, let’s say you currently earn $500,000 per year.

Now you may be a committed saver, saving $200,000 out of that salary each year.

But that means your family is living on $300,000 per year.

If that income disappears, they may have to live on a lot less.

Since that’s a less than desirable outcome, you’ll need a large amount of life insurance to support them.

College is an especially significant family expense.

It can cost several hundred thousand dollars to send a child to a high-quality school.

If you have several children, or if any one of them wants to pursue a career which requires an extended education, the total cost is even higher.

A large life insurance policy, even just for education, can make that happen after your death.

What’s the Best Type of Policy for People with High Net Worth?

Even if you’re a high net worth individual, you don’t want to pay too much for life insurance or have more of it than you need.

You can match coverage with specific needs.

In most cases, term life insurance will be the most cost-effective.

It’s much less expensive than whole life insurance and other investment type policies.

That not only keeps premium costs low, but it also allows you to buy more coverage.

In addition, it tends to match up better against specific expenses.

For example, let’s say your estate has a gross worth of $4 million, but you also have $2 million in debt.

If you expect all the debt to be fully paid within 20 years, you can take a 20-year term policy for $2 million to cover them in the meantime.

Once they’re fully paid, there will be no need for coverage and you can then let the policy expire.

The situation is similar to providing a college education for your children.

You may only need a policy until they complete their educations.

In each of the above situations, term life insurance is the best choice.

But you may need to look at some form of permanent insurance if you want to leave additional funds for your spouse.

Term policies eventually expire, and you won’t be able to replace them beyond a certain age.

On the other hand, a whole life policy will literally last until the end of your life.

Of course, that means it will cost more in annual premiums.

But if you’re a high net worth individual, it will be well worth your time to consider the best combination of coverage and cost.

Bottom Line

As you shop for life insurance, take a look at my review of the top ten life insurance providers in the United States to ensure you get the best price and policy for your needs.

It’s the best way to ensure your loved ones will get the benefit of your entire estate upon your death.

Facebook LinkedIn Twitter

About the Author

Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion - educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.


Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University - Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® - Accredited Asset Management Specialist - and CRPC® - Chartered Retirement Planning Counselor.

While a practicing financial advisor, Jeff was named to Investopedia's distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC's Digital Advisory Council.

Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.

Facebook Twitter LinkedIn


You Might Also Enjoy

Best Homeowners Insurance Companies of 2023 - Updated for March

Best Homeowners Insurance Companies of 2023 - Updated for March

Life Insurance with Kidney Problems

Life Insurance with Kidney Problems

Best Extended Car Warranty for 2023

Best Extended Car Warranty for 2023

Ladder Life Insurance Review - Term Life Insurance with a Twist

Ladder Life Insurance Review - Term Life Insurance with a Twist

Sproutt Life Insurance Review: Is it Legit?

Sproutt Life Insurance Review: Is it Legit?

Best Car Insurance for Young Drivers in 2023

Best Car Insurance for Young Drivers in 2023

Leave a Reply

Cancel reply

  • Make Money
  • Manage Money
  • Invest
  • Taxes
  • Insurance
  • Retirement
  • Banking
  • Home
  • Credit
  • Debt
  • About
  • Contact
  • Facebook LinkedIn Twitter

© 2023 Good Financial Cents®. All Rights Reserved. | Privacy Policy | Disclaimer

All written content on this site is for information purposes only. Opinions expressed herein are solely those of AWM, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

All third party trademarks, including logos and icons, referenced in this website, are the property of their respective owners. Unless otherwise indicated, the use of third party trademarks herein does not imply or indicate any relationship, sponsorship, or endorsement between Good Financial Cents® and the owners of those trademarks. Any reference in this website to third party trademarks is to identify the corresponding third party goods and/or services.