Insurance as an Asset: A Smart Strategy for High-Net-Worth Individuals

For affluent individuals focused on preserving wealth across generations, insurance is more than just a safety net—it’s a strategic financial asset.

While most people view life insurance as a means to replace income or cover final expenses, high-net-worth individuals (HNWIs) increasingly utilize insurance in more sophisticated ways. Here’s how:

1. Liquidity for Estate Taxes

When an estate includes illiquid assets, such as real estate, businesses, or art collections, paying estate taxes can be challenging. Life insurance provides a tax-free death benefit that can be used to settle tax liabilities without liquidating core assets. With the current $13.61 million lifetime estate and gift tax exemption potentially “sunsetting” after 2025 and reverting to an estimated $7.1–$7.2 million, insurance becomes an essential tool for bridging this gap.

2. Wealth Replacement

Charitably inclined HNWIs often donate significant assets during life or at death. Insurance can be used to replace the value of these donated assets for heirs, preserving family wealth while achieving philanthropic goals.

3. Trust-Owned Insurance for Estate Planning

Sophisticated planning structures, such as Irrevocable Life Insurance Trusts (ILITs), enable individuals to keep the insurance policy outside their taxable estate. This ensures the benefit passes to heirs tax-free, which can be vital if estate tax exemptions are reduced or transfer tax rates increase.

4. Asset Diversification and Risk Management

Insurance offers a non-correlated asset class that provides predictable returns through guaranteed death benefits. In a volatile market, this kind of financial certainty can act as a buffer, helping to stabilize an estate’s overall value.

5. Planning Flexibility

Insurance policies, particularly permanent ones, can be structured to allow for future access to cash values, potential tax-deferred growth, and adaptability through riders or conversion features. This flexibility is key for responding to evolving tax laws and family dynamics.

Why Now?

With a changing legislative landscape and possible reforms such as the American Housing and Economic Mobility Act proposing drastic reductions in estate tax exemptions, the window to act may be closing. Acting now allows individuals to lock in today's more favorable conditions, including the acquisition of policies while still insurable, and taking advantage of current exemptions.

Final Thoughts

For high-net-worth individuals, life insurance isn’t just about risk protection—it’s a strategic asset that supports liquidity, tax efficiency, and legacy planning. At DPH Financial Services, we help clients assess how insurance aligns with their comprehensive estate strategy, ensuring their wealth is safeguarded for generations to come.