As a high-net-worth (HNW) investor, your insurance needs often go beyond simply protecting more assets. Your goals, risks and opportunities may differ from the average investor, making a more strategic approach to insurance planning important. Here are five reasons why your situation deserves focused attention:
1. Larger, More Complex Estates
HNW investors often hold substantial wealth in private corporations, real estate and investment portfolios, so insurance needs go beyond basic protection. Insurance can provide estate liquidity, simplify succession and help equalize inheritances when assets are hard to divide. Unlike assets distributed by a will, insurance proceeds typically bypass probate, offering privacy and speed for beneficiaries. Discretion and control are often valued by HNW individuals prioritizing confidentiality and ease.
2. Tax Efficiency Is Critical
With greater wealth often comes greater tax exposure. Insurance can serve as an effective tax-planning tool, particularly permanent life insurance, which allows for tax-deferred growth of the policy’s cash value. When structured strategically, it can facilitate a more tax-efficient transfer of wealth by helping offset estate taxes, including those triggered by the deemed disposition of capital assets at death, to help preserve more of your wealth for the next generation.
3. A Focus on Legacy and Family Planning
For HNW families that prioritize legacy planning, insurance can play a central role in turning long-term intentions into lasting impact. Whether funding charitable goals, protecting dependents or keeping a family business intact, insurance supports legacy planning. It can help transfer wealth tax-efficiently, avoid forced asset sales and even be used to fund trusts or intergenerational wealth strategies. For example, some gradually transfer policy ownership to children or grandchildren, allowing wealth to grow tax-efficiently and transition smoothly across generations. Others use insurance to fund a trust to provide long-term care or financial support for vulnerable family members, without compromising eligibility for government benefits (where applicable).
4. Strategic Portfolio Diversification
Many HNW investors have maximized contributions to tax-advantaged accounts like RRSPs or TFSAs, while holding substantial assets in non-registered accounts. As such, they may seek ways to minimize the tax burden associated with non-registered investments. Permanent insurance solutions can offer an opportunity. The tax-preferred growth of the cash value in participating whole-life insurance, alongside the tax-free death benefit, makes insurance an alternative to lower-risk fixed-income options. Some policies may even outperform the fixed-income component of a traditional balanced portfolio on an after-tax basis. As such, alternative strategies using insurance or annuities can be used to complement investment portfolios and provide diversification.
5. Business Support, Succession and Continuity
HNW business owners can use insurance to play a role in both protecting and transitioning a business. It can be used to fund buy-sell agreements, insure against the loss of a key employee or provide liquidity to support a seamless transfer of ownership to the next generation or a business partner. When held within a corporate structure, permanent life insurance may also offer tax-planning advantages, such as leveraging the capital dividend account (CDA) to distribute death benefits on a tax-free (or tax-advantaged) basis to shareholders. Coordinating insurance with a broader business and estate strategy helps ensure financial stability during transitions while optimizing outcomes for owners and heirs alike.
We Are Here to Help
Insurance goes well beyond protection—it can be a powerful planning tool for the HNW investor. When integrated into your broader wealth strategy, it can safeguard what matters most while creating opportunities for long-term growth and legacy planning. To explore how insurance can support your wealth plan, please call.
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