Life Insurance 101: The more you have, the more you have to protect


August 15, 2023

As you advance in your career and accumulate wealth, your exposure to financial risks, potential losses, and higher taxes increases.

Fortunately, that's where insurance comes in to help prevent, mitigate, and compensate for life’s uncertainties.

We believe that insurance can be a financial superpower too. It’s a tool to replace future unknowns (and uncertainties) with a present cost, allowing you to take calculated risks and live life to the fullest. And in the US, life insurance is often used by the ultra-wealthy as a tax-advantaged investment vehicle (much like a Roth IRA) to grow and transfer wealth.

Now, we know what you might be thinking – insurance isn’t exactly a riveting topic. It’s often associated with high fees, opaque jargon, and pushy salespeople. But with Arta, insurance experts take on all the admin, so you get only the good stuff. 

So, consider this article a “life insurance refresher,” where we’ll cover valuable insurance options to safeguard your growing wealth.

Key points:

  • Insurance is a valuable tool to prevent, mitigate, and compensate for financial risks and uncertainties as you accumulate wealth.

  • Term life insurance acts as a safety net for loved ones, providing financial support during difficult times.

  • Ultra-wealthy individuals use permanent life insurance as a tax-advantaged investment vehicle to grow and transfer wealth.

  • Premium-financed insurance is an option for high-net-worth individuals to pay premiums using borrowed funds.

  • Arta can help you create an insurance plan that fits your needs and supports your financial goals.

Life insurance

Pure life insurance is a type of insurance that provides a payment to the beneficiary when the policyholder passes away. It can help provide financial security for loved ones in the event of the policyholder's untimely death. The two main types are term and permanent life insurance.

Term life insurance

Term life insurance typically covers a specific period, e.g., 10 or 20 years. It’s important to consider when you have dependents who rely on your income or when you have significant debt or financial obligations. Term life insurance is the cheapest form of life insurance coverage, and the proceeds (upon the policyholder’s passing) may be income-tax-free to beneficiaries. 

Today, term life insurance can be bought online through many insurance companies, with no medical exam requirements up to $2 to $3 million in coverage.

Permanent life insurance

In addition to offering coverage for the policyholders’ lifetime, permanent life insurance policies can also act as a vehicle to accumulate tax-free cash over time. 

Permanent policies typically have higher premiums than term life insurance policies, but a portion of each premium payment goes toward the policy's cash accumulation. The cash accumulation can be invested in various options, such as stocks, bonds, mutual funds, or even private placements, depending on the policy type. Permanent life insurance is similar to a Roth IRA in that it is funded with after-tax dollars, and the policy's cash value does not incur any capital gains or income taxes (unless withdrawn).

Permanent life insurance policies offer a significant advantage: policyholders can borrow against the policy's cash value tax-free as a policy loan. In addition, policyholders can withdraw cash as needed (although withdrawals may be subject to taxes and fees).

Comparing permanent and term life insurance

Permanent Life Insurance (Like owning a home)

Term Life Insurance 

(Like renting an apartment)


Lifelong coverage as long as premiums are paid

Coverage for a specific period, typically 10-30 years

Cash value growth

Contains a cash value

Does not contain a cash value

Access to money while alive

Cash value can be accessed while alive via policy loans and/or withdrawals

There is no cash value to access


Higher premiums (5-15 times more than term life)

Lower premiums in the short term; costs can increase over time


Ideal for long-term financial planning and wealth transfer

Ideal for short-term, more affordable protection

Premium financing

Can be financed with a loan

Cannot be financed

** It is worth noting that insurance policies should not be the sole basis of an investment strategy. They should be considered as part of a broader financial plan that takes into account other investments, such as retirement accounts, Growth AMPs, Harvest Treasuries AMPs, and alternatives. **

Premium-financed insurance

Premium-financed insurance is a more sophisticated option well-known to ultra-wealthy individuals. Instead of paying the premiums for a policy with cash, they choose to borrow money to pay the premiums for a permanent life insurance policy, intending to pay off the loan using the cash value or the benefit upon passing from the policy. In essence, ultra-wealthy folks know how to leverage the insurance policy to pay for itself. This allows individuals to maximize their wealth by investing the money they would have used to pay the premiums into higher-yield investments. 

Enjoy life’s adventures

Life insurance is essential to all financial plans. Permanent life insurance policies are an option for higher-income individuals who want to combine their insurance needs with a tax-advantaged investment strategy if they have already maximized other tax-advantaged accounts, or don’t qualify for them. For high-net-worth individuals, premium-financed insurance is another sophisticated insurance option to consider.

Work with your digital family office to determine which insurance plan best suits your goals, family, and future. At Arta, we’re waiting to help you get your insurance plan in place so you can live your life to the fullest.



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