How high-net-worth insurance protects Canadian family wealth

High-net-worth insurance is an area where you can add real value to clients who have accumulated substantial assets. It goes far beyond income replacement. With the right policies, your clients can protect the wealth they have built and pass assets to the next generation more efficiently.

In this article, Wealth Professional Canada will shed light on how high-net-worth insurance works, who it suits, and other valuable insights. Want to understand how these can support your clients’ wealth and legacy plans? Read on for more.

What is high-net-worth insurance?

High-net-worth insurance refers to using insurance products to address the specific needs of wealthy individuals and families. It is less about basic protection and more about wealth preservation and income continuity. Wealthy clients also consider legacy planning.

For this group, insurance often covers several objectives at once. Policies can help pay future income tax plus other estate-related costs and protect against the loss of earning power. They can also help with philanthropy by turning policy benefits into charitable gifts with added tax advantages.

High-net-worth insurance often involves a combination of:

• life insurance
• health insurance
• disability insurance
• critical illness insurance
• long-term care insurance

Each of these can serve a distinct role. Together, they can give your clients more control over how their wealth is protected and passed on.

Want to learn more about how the healthcare system and health insurance work in Canada? Read this guide.

Who qualifies as high-net-worth individuals in Canada?

Do your clients have about $1 million in investable assets? If so, they are considered high-net-worth individuals (HNWIs). This figure generally excludes the client’s primary residence and focuses on liquid or near-liquid holdings.

In some cases, the threshold refers to the household’s investable assets rather than one individual. At the upper end, ultra-high-net-worth individuals (UHNWIs) often have more than $10 million in investable assets.

For instance, Jim Pattison, who places fifth in our top 10 list of Canada’s wealthiest people, has a net worth of about $12 billion, making him an UHNWI.

These clients often hold numerous types of assets such as:

• multiple accounts
• properties
• businesses
• private equity or alternative investments
• collectibles or other high-value personal assets

HNWI might need more detailed planning to manage risk, taxes, retirement income, and family legacy goals. Regardless of the exact threshold, high-net-worth clients share certain concerns. They want to:

• protect their income and lifestyle
• reduce the impact of taxes on their wealth
• smooth wealth transfer to the next generation
• limit the impact of volatility on large portfolios

They are also aware that even a small difference in fees, volatility, or tax treatment can have a large effect on their portfolio.

What high-net-worth clients are looking for

Like other investors, your high-net-worth clients want to grow their money over time. Their choices still depend on risk tolerance and financial objectives. However, scale and complexity change how those choices play out.

Many wealthy retirees and entrepreneurs depend on investment income rather than a regular salary. They often look for strategies that can support reliable cash flow and reduce large swings in portfolio value. HNWIs also want solutions that protect against health and disability risks that could disrupt plans.

This is where products such as disability insurance and life insurance become part of the discussion, not just market holdings. Because their portfolios are larger, small differences in cost and tax treatment can add up quickly.

Wealthy clients often want help in reducing fees where possible, building tax-aware strategies, and planning ahead for succession, estate distribution, and charitable giving. High-net-worth insurance can cover each of these areas in specific ways.

Identifying high-net-worth insurance needs

Choosing the right mix of coverage starts with a full view of your client’s situation. As a financial advisor, you can guide them through a review of assets, liabilities, and dependants’ needs.

It helps to separate liquid assets, which are easy to turn into cash, from illiquid assets, such as private companies or specialty property. Illiquid holdings often benefit most from insurance-based liquidity.

Liabilities include mortgages and personal loans. These also involve business debt and taxes that will be due at death. Federal and provincial taxes are paid first from the estate, followed by secured and unsecured debts.

Dependants’ needs cover:

• ongoing support for family members
• education costs for children
• help with home purchases
• planned gifts to charities and foundations

Once you have done a review, you can estimate how much cash might be needed.

Disability insurance

Disability coverage is designed to protect what is perhaps a person’s most significant asset: their ability to earn a living. Policies usually pay out a portion of one’s income if they are unable to work because of an illness or injury.

However, most long-term disability policies offer a low maximum, usually $10,000 a month. This is likely insufficient to meet the needs of high-income earners. Depending on how the premiums are paid, this amount can be fully taxable, further reducing how much policyholders receive.

For high-net-worth individuals, taking out high-limit disability insurance is a better option. Such policies can provide up to $150,000 monthly or $2 million in annual coverage tax-free.

Short-term disability insurance

This provides income coverage for short-term or temporary health issues, usually lasting between six and 26 weeks. It can be extended up to 52 weeks (one year). Benefit payments can start as soon as the insured has used up their sick leave or one to 14 days after a claim is submitted.

Long-term disability insurance

This covers more persistent health issues, with coverage starting right after the short-term disability period. Depending on the insurer, coverage can last between two and five years. The coverage period can extend until the age of 65 if the policyholder is still unable to work.

Critical illness insurance

Critical illness insurance pays a lump sum when the insured is diagnosed with a covered serious condition. The benefit is paid while the person is alive. This is why it is often called a living benefit.

The lump sum can replace income during treatment and recovery. It can also pay for medical care, travel, or home adjustments and help your clients avoid selling investments at the wrong time.

For high-net-worth families, it can also protect investment plans by reducing the need to liquidate assets to cover urgent medical costs. Some policies include a return-of-premium option, where premiums are refunded if no claim is made. This can appeal to wealthy clients who want protection but dislike the idea of unused premiums.

Long-term care insurance

Long-term care insurance focuses on the cost of care when an individual can no longer manage daily activities without help. It often supports expenses such as assisted living or nursing facilities. Benefits are usually non-taxable in Canada.

This insurance type can pay a fixed income-style benefit each month for a set period or reimburse approved care expenses up to policy limits. For affluent seniors, this coverage can help protect retirement savings from the high cost of long-term care.

How much does high-net-worth insurance cost?

Premiums for private health coverage vary depending on a range of factors, including the person’s age and health status, plus the policy’s coverage levels.

An average Canadian might pay around $725 to $750 each year for private health coverage. However, wealthy individuals often have unique healthcare needs that can drive up insurance costs. They might want access to an extensive list of healthcare specialists. They might also value privacy and personalized coverage.

High-net-worth individuals who often travel the world would most likely prefer health insurance with global coverage. They might look for features and benefits that standard health plans don’t provide, and they aren’t worried about incurring additional costs.

Business succession and high-net-worth insurance

Many high-net-worth Canadians are business owners. For them, insurance planning is closely linked to succession. The goal is to reduce uncertainty for surviving partners and family members while protecting the value of the business.

A common approach is to fund a buy-sell agreement with life insurance. Business partners purchase policies on each other and name one another as beneficiaries.

When one partner dies, the insurance proceeds give the surviving partner or partners the cash needed to purchase the deceased partner’s share from their estate. This arrangement can:

• prevent disputes over control of the business
• provide liquidity to the deceased partner’s family
• reduce pressure to sell the business in a hurry

For a financial advisor, this is an interesting area to explore especially if you have clients who are entrepreneurial HNWIs.

Which of these five personas best describes your wealthiest clients? Find out here.

How high-net-worth insurance can support your work

High-net-worth insurance can provide you with more ways to help your wealthiest clients protect what they have built. It can preserve assets and make wealth transfer smoother. It also gives families assurance that health issues or long-term care needs will not quickly erode their savings.

Now that you’ve seen how life, health, disability, critical illness, and long-term care coverage fit together, you can guide HNWIs in building more goal-driven plans. You can also help them use insurance to connect estate planning with business succession and keep more of their wealth in the family.

As more wealth moves between generations in Canada, this type of planning will matter even more. Finally, when you include high-net-worth insurance in your discussions, you can help affluent clients support the legacy they want to leave.

We have an entire section on life and health insurance. Make sure to check and bookmark it for more information.