A report says the world's wealthy elite - actors, athletes, business tycoons and musicians - all share similar concerns to the common population when it comes to insurance.
According to Bankrate.com, many wealthy celebrities find that they're either overinsured or underinsured on vital concerns such as auto, property and health coverage. It's not until a financial planner steps in that they realize they need more than just $400,000 coverage for the $4 million Rembrandt painting hanging in their foyer, said the report. However, many wealthy people have used life insurance policies to their maximum benefit in terms of estate planning, a lesson the report says everyday consumers could learn from.
Raquel Murphy, a life insurance specialist, told the source many celebrities and tycoons want to pass on their wealth to their children but leave themselves open to significant estate taxes. A person with $20 million in assets, for instance, could pass down a limit of $10 million tax-free to their children. The remaining $10 million would be subject to taxation and they could lose as much as half that, Murphy said.
"So to pass on more of the $10 million, they will leverage by buying a life insurance policy to cover $5 million. Yes, government will still get their tax, but they will only get half of the $5 million," Murphy told the source.
Retirees with businesses or other major assets may want to consider life insurance to cover their own estate, experts say.