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  • Writer's pictureSung-Yen Sammy Tsai

Life Insurance for the wealthy, myth-busting benefits

Key Insights:

  1. Insurance can help preserve affulent lifestyles

  2. Permanent Life insurance can protect or enhance financial capitals

  3. Permanent Insurance is an asset class worth considering

Life Insurance is wealth protection.

What do wealthy individuals need to protect?

Myth: The wealthy don't need life insurance

Fact: Insurance can help maintain affulent lifestyles

Human Capital

Income and Lifestyle

Let's imagine, successful business couple drawing income from their business each year and don't plan to retire for another 10 years. A term insurance policy- which provides insurance protection for a specific period of time and is the cheapest form of insurance - could be put in place to help protect this income stream if an early death occurs.

Likewise, a disability insurance policy could protect this income stream if one of the business owners becomes disabled and is unable to work.

Lastly, critical illness insurance - which pays a lump sum amount upon the diagnosis of a major illness if the individual survives the required waiting period - can be instrumental in covering some of the high costs that can stem from such an illness.

All of the above are some of the options the couple can use from the policy payout to cover things like, financing a leave from the business, hiring staff at home or at workor managing their on-going credit costs.

*This helps preserve the investment nest egg the couple has built over the years.

Myth: As wealth increases, the need for insurance decreases.

Fact: Permanent insurance can protect or enhance an individual's financial capital.

Financial Capital

Estate, business and lifestyle planning

While life insurance offers "human capital" protection, it's the "financial capital" benefits that affulent individuals miss out on by buying into the myth that life insurance isn't for them.

For investment goals -

Clients can use insurance as an alternative asset class

When we think of asset classes, we usually think of stocks, bonds, real estate and cash investments. But permanent life insurance policies can produce better after-tax rate of return than more traditional, conservative investments like Guaranteed Investment Certificates (GICs) or government bonds.

Once individuals maximize their tax-preferred savings opportunities - Registered Retirment Savings Plan and Individuals Pension Plans, and Tax Free Savings Account - they have limited options for tax deferral or tax savings.

For individuals who have enough savings to finance their retirement income needs and are looking to maximize tax and maximize their estate's value, a permanent insurance policy can provide significant benefits.

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