Life Insurance and the wealthy

As wealth grows, so do the needs of Clients.
Insurance can help preserve affluent lifestyles.

As wealth grows, so do the needs of Clients.
Insurance can help preserve affluent lifestyles.

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Contact a Sun Life representative

There’s a common misconception that as wealth increases, the need for insurance decreases.


The wealthy often believe they can self-insure. But while the wealthy may have sufficient wealth to meet their basic living needs, the surprising fact is that the benefits they can derive from insurance is greater than ever.

What’s more surprising is that these key benefits are often missed in conversations between advisors and their wealthy Clients.

The unfair stigma of life insurance creates barriers to having conversations about wealth protection

As we continue to enjoy extended longevity, we see a corresponding increase in the need to help fund extended retirement living and long term care, so it’s important that insurance and tax policies provide Canadians appropriate protection. And, contrary to what you might think, the role of life insurance actually grows in importance as individual wealth grows.

It’s time to put to rest the misconceptions that prevent people from getting the financial protection they need – and want.

Make no mistake, individual wealth is indeed growing. Billions of dollars are being passed annually to the boomer generation from their parents, and billions have been created by professionals and business owners.2 There’s a lot at stake. It’s an important time to get the facts straight about the role insurance can play in enhancing and preserving wealth, whether earned or inherited, so let’s look at five things clients might not be hearing from their advisor.

1. Affluent people really want insurance
As people’s wealth increases, they often enter a higher tax bracket and have excess capital. If they own a business, they’re typically looking for solutions to help manage the assets that have accumulated in it. The more wealth people have, the more accustomed they become to a higher standard of living – and the more they have to lose. Life insurance is a safeguard to protect the affluent investor’s lifestyle no matter what the future holds.

Permanent life insurance can benefit investors by:

  • Covering tax liabilities
  • Transferring assets tax effectively
  • Providing access to capital

2. Group life insurance doesn’t usually provide enough coverage
You may not recognize how much insurance you actually need. It’s true that many people already have insurance, either through work or individually. But what they often don’t recognize is how much insurance they actually need. The growing trend of relying on minimal levels of group coverage leaves many Canadians underinsured.  The bottom line? The amount of insurance you need to protect your wealth may be much higher than you think and likely far beyond what your group plan offers.

3. Insurance is a well-performing, low-risk investment
We don’t traditionally think of insurance as an investment, but it has gained wide recognition as an alternative asset class. Why? Permanent life insurance often produces superior rates of after-tax return than more traditional, conservative investments like GICs or government bonds. Permanent insurance can enhance a non-registered investment portfolio by providing tax-sheltered investment growth.

4. Canadian life insurance companies are a safe place to put a Client’s money Payout rates for life insurance claims are extraordinarily high. There’s very little grey area when it comes to life insurance payouts, and there is little risk that the insurance company won’t be there when it’s time for the policy to be paid out.

5. Clients don’t need to work with that old stereotypical insurance agent
The good news is there are insurance professionals and holistic financial advisors who specialize in working with affluent investors to protect their assets and maximize their estates. You can choose to work with an insurance advisor who will become part of your financial team. Working alongside your other investment advisors and/or tax and accounting professionals, insurance advisors can apply their specialized, sophisticated knowledge about tax and estate planning that can help you preserve and enhance your wealth.

Related resources:

5 things advisors often don’t tell wealthy Clients (article)

Key insights

  • Insurance can help preserve affluent lifestyles
  • Permanent life insurance can protect or enhance financial capital
  • Permanent insurance is an asset class worth considering

There are grains of truth to many myths, but others simply don’t stand the test of time. For example, years ago parents would tell their kids to dress warmly so they wouldn’t catch a cold. But medical professionals busted that myth when they discovered that cold air doesn’t make you sick.

There’s a persistent myth about life insurance too: “the wealthier you are, the less you need it.” Like many other generally accepted “truths”, this one appears logical on the surface. But dig a little deeper and you’ll find a different story.

The more you have, the more you have to lose.

There are two key areas where life insurance can benefit wealthy individuals:

Human capital

  • Benefit: protecting the value of an individual’s income earning potential.

Financial capital

  • Benefit: growing and protecting assets that an individual already owns, and which make up their net worth (real estate holdings, a business, investments).

Human capital

While the need to protect human capital typically declines as individuals approach the end of their income-earning years, it may still have an important role to play for wealthy individuals with some earning years left and a lifestyle they want to maintain.

Financial capital

While life insurance offers “human capital” protection, it’s the “financial capital” benefits that affluent individuals miss out on by buying into the myth that life insurance isn’t for them.

As an individual’s wealth grows, their need for estate, business and lifestyle planning increases. Life insurance can play a valuable role in each of these areas - not just protecting wealth but also growing it.

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

  1. A tax-free death benefit
  2. Tax-preferred investment growth
  3. Avoidance of estate settlement costs such as probate fees

The wealthy might not think they need insurance but that doesn’t mean they don’t want it.

Articles and whitepapers:


Life insurance as an asset class 

  • Download the zip file containing the presentation and email templates to teach clients the components of their total wealth, the importance of “safe money”, and how insurance can help diversify their portfolio.


  • Speak to a sales representative for more information about these presentations
  • Life insurance as an asset class (for advisors)
  • Advanced retirement income planning
  • Beyond illustrations
  • Deep dive on Par
  • Two options are better than one (comparing Par and UL)

Add value for wealthy Clients with videos

Provide instant value by sharing these Sun Life videos. They’re a great way to connect with new Clients, or give a friendly nudge to existing ones.

  • Estate maximization for business owners (chalkboard video)
    This animated video explains the benefits of permanent life insurance in comparison to the taxable growth of passive investments held within a corporation. Not only is cash value growth tax-free while inside an insurance policy, it provides a tax-free dividend credit on the death benefit because of the capital dividend account. The result is a greater net-to-estate value for Clients. 
  • Estate maximization for business owners (non-chalkboard)
    The same powerful story as our chalkboard video but told in live action.
  • Estate maximization with liquidity for business owners
    Expanding on the benefits of permanent insurance, this video describes options for liquidity. It presents several strategies that can make the cash value of life insurance a powerful asset for business owners.
  • Estate maximization for non-business owners
    This video focuses on the benefits of insurance to the individual policy owner. It shows how insurance can be a powerful way to maximize the net estate value of one’s assets through a tax-efficient wealth transfer.
  • Life insurance as an asset class
    Life insurance can be an alternative asset for individuals looking for a product with a reasonable return and low volatility. This video explains that by shifting some investments to insurance, Clients may improve their return-to-risk ratio.
  • Protecting your wealth with life insurance
    Insurance can help protect human capital (the ability to generate wealth through income) from the risk of premature death or a severe illness. It can also help protect financial capital (monetary wealth) through beneficial tax treatment of policy growth, as well as when transferring wealth to loved ones at death. Send this video to Clients or prospects to share how you can help find the right solution for their needs.

Or share these short videos on life insurance concepts

Get the resources. Start the conversation 

Contact a Sun Life Representative

Excel Strategy Tools

Sun Life has many Excel tools to support conversations with Clients. Use them to:

  • compare Sun Life products to alternative investments
  • improve understanding of concepts presented in our articles and resources
  • provide visual aids when communicating strategies to Clients

The following tools are available through a Sun Life sales representative:

  • Immediate financing arrangement (IFA): Show business owners how the cash value of a corporately held insurance policy can be used as collateral for a tax-free third-party loan. Calculate the internal rate of return and other values and see the result of applying various tax deductions.
  • Bolstering the balance sheet (BBS): Show Clients how the cash value of a corporately owned insurance policy can have a positive impact to both the balance sheet and income statement.
  • Post-mortem planning: This tool illustrates the improvement in net estate values by incorporating insurance into post-mortem planning strategies. It can help when working with accountants, who commonly use loss carry back or pipeline as terminal tax planning for corporate clients.
  • Charitable giving of an insurance policy: See if it's best for a Client to donate their policy now or at death based on their needs and by calculating the total tax credit they can actually use.
  • Internal rate of return (IRR) on insurance cash values: Calculate the before- and after-tax internal rate of return on cash values of an insurance policy, as well as the annual rate of return.
  • Buying Par versus buying term and investing the difference: Compare a participating policy versus a term policy, with the difference invested into equities that incorporate volatility.

The concepts below are available in the Sun Life Illustrations software. You can also access a simplified Excel version through a Sun Life sales representative:

  • Individual investment strategy (IIS): Compare the projected values of a permanent insurance policy and an alternative investment with equal payments. Use the Corporate investment strategy (CIS) tool for corporately held assets.
  • Individual asset transfer (IAT): Starting with an initial balance in the alternate investment, this demonstrates the advantage by transferring some of the alternative investment assets to a permanent insurance policy. Use the Corporate asset transfer (CAT) tool for corporately held assets.
  • Individual retirement strategy (IRS): Clients can use assets as collateral for a tax-free third-party loan to fund their retirement. Compare the advantage of the cash value in a permanent insurance policy as collateral versus using alternative investment. Use the Corporate retirement strategy (CRS) tool for corporately held assets.