Advanced protection strategies for high net worth individuals

Most successful individuals understand the value of investing, tax planning, and building wealth. But far fewer give the same care and attention to protecting it.

We often encounter HNWIs with portfolios worth millions – yet protection strategies that are fragmented, outdated, or insufficient. The issue isn’t affordability. It’s complexity. And the misconception that insurance is only for people with “less to lose.”

The reality is this: the more you have, the more you need to protect.

In this article, we explore the advanced protection strategies used by high-net-worth individuals to safeguard their wealth, ensure family continuity, and keep their businesses resilient.

Term life vs. Whole of life: Matching product to purpose

While most people are familiar with term life cover, many HNWIs require a combination of term and whole-of-life (WOL) policies to achieve different objectives:

• Term cover: Useful for covering debts, children’s education, or business continuity during a defined period (e.g. until retirement or exit).
• Whole-of-life cover: Critical for estate planning – ensuring liquidity to meet inheritance tax (IHT) liabilities.

Writing policies into trust

High earners often make the mistake of holding policies in their own name, which brings the payout into their estate – and potentially into the IHT net at 40%.

The solution? Write policies into trust to keep them outside the estate, avoid probate delays, and give control over who receives what, when, and how.

Relevant Life Plans (RLPs) are a highly tax-efficient way for employers (typically limited companies) to provide individual life cover for an employee, including directors. They’re especially attractive to high earners and owner-managed businesses looking for a cost-effective way to protect loved ones and extract value from the company.

A Relevant Life Plan is a term life insurance policy that provides a lump sum benefit to the insured’s family or nominated beneficiaries if they die (or are diagnosed with a terminal illness) during the policy term.

For company directors, a Relevant Life Plan (RLP) can help to extract value from their business tax efficiently. For directors, high-earning employees, or partners in a firm, RLPs are often a cornerstone of HNW protection planning. Proceeds are typically paid into a discretionary trust, keeping them outside the estate.

Critical illness cover is often overlooked by high net worth individuals, who may believe their wealth alone provides sufficient protection. However, for affluent clients – especially those with dependents, complex financial structures, or lifestyle dependencies on active income – critical illness cover is not just a safety net; it’s a strategic wealth preservation tool.

Liquidity protection at a critical time

While HNWIs may have significant assets, those assets are often tied up in illiquid holdings – property, businesses, pensions, or investments that cannot be easily accessed or sold without penalty or delay. A tax-free lump sum from a critical illness policy provides instant liquidity without needing to disrupt investment strategies, crystallise capital gains, or make distress sales.

Protecting human capital

Many HNWIs are entrepreneurs, executives, or consultants whose ability to earn is tied to their health and cognitive function. A diagnosis of cancer, stroke, or a heart attack could halt their income-generating potential – even if temporarily. Critical illness cover acts as a monetisation of human capital, ensuring the individual and their family can maintain lifestyle, commitments, and responsibilities without compromise.

Offsetting opportunity costs and recovery time

The cost of a serious illness is not just medical – it includes:

• Loss of earnings (particularly for self-employed/HNWIs with performance-linked income)
• Treatment abroad, private rehab, or experimental therapies
• Time away from business ventures, affecting future growth and compound returns

Critical illness cover can fund these without eroding long-term investment portfolios or derailing growth strategies.

Protecting leverage and legacy commitments

HNWIs often use geared strategies – leveraging property or investments – and are committed to legacy or intergenerational planning. A serious illness at the wrong time could force early liquidation of assets, undermine gifting strategies, or create unforeseen liabilities.

Critical illness payouts can:

• Pay off loans or service interest during incapacity
• Fund trust or IHT planning strategies without delay
• Maintain life cover or pension contributions during recovery

Supporting family stability and dependents

For clients with children in private education, dependents abroad, or family members reliant on their oversight (e.g. elderly parents, disabled children), a critical illness diagnosis can ripple through their financial ecosystem. Having an immediate lump sum allows the family to bring in support, continue funding important commitments, or restructure life with minimal stress.

Business continuity and key person risk

If the HNWI is a business owner, their illness could trigger:

• Business interruption
• Loss of investor confidence
• Buy-sell complications with co-directors
• Staff or client attrition

Critical illness cover can be written in trust or as part of a business protection plan, providing capital for succession, share purchase, or continuity.

Tax-efficient structuring

Depending on how it’s set up, critical illness can be arranged in tax-efficient structures that reduce corporation tax and preserve personal allowances.

HNWIs often have non-salary income (e.g., dividends, drawings, performance bonuses), making standard income protection inadequate or mispriced.

Solution: Executive Income Protection, which can be structured via a company to:

• Cover a % of total remuneration, not just base salary
• Be tax-deductible for the company
• Provide ongoing cover during sabbaticals or international relocation (if structured correctly)

For entrepreneurs or partners, cover can be extended to:

• Replace lost profits or revenues in the event of illness
• Provide sick pay for multiple directors or key individuals

If you run or co-own a business, you are the business. Your loss could destabilise your team, clients, and profitability.

Key Person Insurance:

Covers financial loss from the death or serious illness of a key revenue generator or leader. Payouts can be used to:

• Recruit replacements
• Cover lost profits
• Stabilise credit lines or investor confidence

Shareholder/Partnership Protection:

If a co-owner dies or becomes critically ill, what happens to their shares?

Solution: Cross-option agreements funded by life and/or critical illness cover allow surviving shareholders to buy out the deceased’s estate at fair value, keeping ownership within the firm and avoiding disputes.

Premium equalisation also ensures tax efficiency and fairness between shareholders.

Using life insurance in estate planning

When structured correctly, life insurance is a powerful estate planning instrument – not only as a means to provide for heirs, but also as a way to protect the estate itself. For wealthy individuals and families, particularly those with complex asset structures (e.g. businesses, real estate portfolios, or international holdings), life insurance can solve several challenges that arise when passing wealth between generations. Many wealthy families use life insurance as a liquidity tool to fund estate tax liabilities, often via Discretionary Trusts. This ensures:

• Rapid access to capital (outside probate)
• No forced asset sales (such as property or business interests)
• Equalisation between beneficiaries (e.g., if one child inherits a business and the others don’t)

For ultra-high-net-worth individuals with high net worth but illiquid or unpredictable income, premium financing is becoming increasingly popular. This involves:

• Borrowing funds (often through referral to private banking solutions) to pay large policy premiums
• Using the policy’s cash value and/or death benefit as security
• Repaying the loan via the estate, policy proceeds, or other liquidity events

This preserves capital and investment returns, avoids disrupting cash flow or needing to liquidate high-performing assets, and allows for much larger policies than might be affordable with cash alone. However, it is a complex strategy involving interest rate risk, loan covenants, and insurer underwriting – so professional advice is essential.

Additional considerations

• Gift of premiums: Regular premiums paid into a trust may be exempt from IHT if they qualify as normal expenditure out of income.
• Business Relief: If certain business assets qualify for Business Relief, life insurance might not be needed for those – but it’s important to plan for assets that don’t qualify.
• Generational planning: Life insurance can also be used to fund Legacy Trusts or Dynasty Trusts, ensuring wealth protection across multiple generations.
• Expatriates: International clients may benefit from offshore life assurance policies, adding layers of tax efficiency across jurisdictions.

For internationally mobile clients or those with high expectations for healthcare, private medical insurance and international health plans are essential.

Plans may include:

• Worldwide cover with no cap on cancer care
• Direct billing for major hospitals
• Concierge claims management
• Optional cover for dependents, domestic staff or business employees

HNWIs also benefit from second opinion services, executive health screening, and genomic testing – all now available via advanced private healthcare packages.

Increasingly, HNWIs want to align their protection strategies with their values, such as:

• Naming charitable organisations in their trust beneficiaries
• Using overfunded life policies to create legacy donations
• Applying ESG filters to insurers or private medical providers

These choices can be embedded into broader philanthropy planning, often in tandem with donor-advised funds or family foundations.