If I'm Wealthy, Why Do I Still Need Insurance?
It’s a common belief among affluent Canadians and business owners:
“I’ve accumulated enough wealth. Insurance isn’t necessary anymore.”
At first glance, the logic seems sound. If you have substantial assets, strong cash flow, and diversified investments, why pay premiums for something you may never use?
The issue is that this thinking often misunderstands what insurance is truly designed to do. Insurance is not meant to compete with investments. It is not about returns. It is about certainty, control, and protecting your plan from risks that wealth alone cannot eliminate.
For high-net-worth families, insurance is often less about replacing income and more about preserving outcomes.
Wealth Reduces Risk, But It Does Not Eliminate It
Roughly 88% of high-net-worth Canadians plan to pass their estate to the next generation, yet only about 54% have a life insurance policy, and less than one-fifth are very knowledgeable about life insurance’s tax advantages.
Yes, wealth provides flexibility. It can absorb setbacks, fund emergencies, and smooth volatility. But certain risks remain, regardless of how much capital you have.
Some examples include:
A large, immediate tax bill at death
Illiquid assets such as private corporations or real estate
Unequal inheritances when one child receives the business and others do not
The forced sale of assets to cover taxes or debts
Legal exposure or creditor risk tied to operating companies
These risks are not about affordability. They are about timing, structure, and control.
Insurance exists to transfer specific risks away from your balance sheet and onto an insurer, creating certainty where uncertainty would otherwise exist.
Insurance Is Not an Investment. That’s the Point.
One of the most common objections we hear is that insurance does not offer attractive returns compared to traditional investments.
While this may be true, comparing the two can be like comparing apples to oranges.
Insurance is not designed to grow wealth. It is designed to protect it.
Trying to evaluate insurance through an investment lens is like judging a fire extinguisher by how often it gets used. The value is not in frequent use. The value is in knowing it is there when nothing else will do the job.
For affluent families, insurance plays a strategic role alongside investments, not instead of them.
Where Insurance Still Matters for High-Net-Worth Canadians
1. Creating Liquidity at the Exact Moment It’s Needed
Many wealthy Canadians hold a significant portion of their net worth in:
Private corporations
Commercial or recreational real estate
Farms or operating businesses
Long-term investment portfolios
Upon death, capital gains taxes can be triggered immediately, even though the underlying assets may be difficult or undesirable to sell.
Life insurance can provide tax-efficient liquidity precisely when the estate needs it most, allowing assets to be preserved rather than liquidated under pressure. This provides optionality for the beneficiaries and the ability to decide what to do with the proceeds, giving them the choice whether to retain an asset without forced liquidation (often at inconvenient times). While dealing with the loss of a loved one is never easy, having the resources, a sound strategy, and optionality can greatly impact the emotions and reality a beneficiary goes through.
2. Managing Estate Taxes Without Disrupting the Plan
In Canada, there is no inheritance tax, but there is a deemed disposition at death. This can result in significant tax exposure, particularly for business owners and real estate investors.
Insurance can be used to:
Offset future capital gains tax
Fund estate liabilities without borrowing or selling assets
Preserve charitable or legacy intentions
For incorporated business owners, corporate-owned life insurance can also create credits to the Capital Dividend Account, allowing tax-free distributions to heirs.
3. Equalizing Inheritances Fairly, Not Just Equally
Estate planning is rarely as simple as dividing everything evenly.
If one child is active in the family business and another is not, insurance can be used to equalize the estate without forcing difficult decisions around control or ownership.
This is not just a financial strategy. It is a family harmony strategy.
4. Protecting Against Risks That Wealth Cannot Predict
Longevity, health events, lawsuits, and changes in tax policy all introduce uncertainty. While wealth helps manage these risks, it does not eliminate them.
Insurance provides a known outcome in an unknown future. That certainty can be especially valuable as plans become more complex and multi-generational.
Insurance as a Planning Tool, Not a Product
For affluent Canadians, the most effective insurance strategies are rarely transactional. They are integrated into a broader plan that considers:
Estate and succession planning
Corporate structure
Tax efficiency
Family dynamics
Legacy and philanthropy
When used properly, insurance does not compete with your wealth. It supports it.
The Real Question Is Not “Can I Afford the Risk?”
Most wealthy individuals can afford many risks. The better question is:
“Should my family, my business, or my estate have to absorb them?”
Insurance allows you to decide which risks you retain and which ones you deliberately transfer, protecting the outcomes you care about most.
Final Thought
Wealth creates opportunity. Insurance protects outcomes.
For high-net-worth Canadians, insurance is rarely about need in the traditional sense. It is about precision, control, and ensuring that your plan works as intended, regardless of timing or circumstance.
If you are wondering how insurance fits into your broader wealth or estate strategy, speak with your advisor. The right conversation can help determine whether insurance is simply an expense or a strategic asset within your plan.
Disclaimer: This article is for informational purposes only and does not constitute insurance, tax, legal, or financial advice. The suitability of any insurance or planning strategy depends on individual circumstances, objectives, and current legislation. Insurance products and tax rules are subject to change. Readers should consult their advisor and qualified professionals before implementing any strategy discussed.
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