Insurance Planning vs. Sales: A HNW Retiree's Guide
Episode 14
Insurance Planning vs. Sales: A HNW Retiree's Guide
Published on November 26th, 2025
Episode 14 of Retirement Tax Matters explores the critical difference between being sold an insurance policy and actively engaging in comprehensive insurance planning, specifically tailored for high-net-worth retirees. We discuss why simply buying a product from an agent can leave you with policies you don't understand, versus working with a financial planner who integrates insurance into your broader tax and legacy goals. The conversation covers when life insurance is still necessary (such as for estate tax planning or special needs), why many retirees might not need it, and the importance of conducting a full inventory of your existing policies to identify redundancy. We also introduce advanced strategies like 1035 exchanges to repurpose old, inefficient policies into better-suited products like long-term care coverage. Finally, we highlight the often-overlooked necessity of an umbrella policy for asset protection and discuss how partially self-insuring risk can sometimes be the smartest move for HNW families.
Key Tax Planning Questions
Click Below To See The Answer
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For most high-net-worth (HNW) retirees, the general answer is no. As a financial planner, I often say that rules of thumb are useful starting points, but they apply to no one in particular because every situation is unique.
However, the primary purpose of life insurance is income replacement. If you have successfully accumulated enough assets ($2M–$8M+) to become self-insured and no one is financially dependent on your continued earning power, you likely no longer need a traditional life insurance policy.
That said, here are just a few quick exceptions I thought of where life insurance remains a powerful tool in a HNW financial plan:
1. Funding for Dependents with Special Needs: This is the most critical exception and probably the most obvious. Even with a significant retirement savings (e.g., $5M), you may want absolute certainty that a child or loved one with a lifelong disability will have dedicated resources for their care, regardless of how long you and your spouse live or what happens to your estate. In this scenario, a permanent cash-value life insurance policy is usually a better fit than term insurance, as the need is permanent, not temporary.
2. Mitigating the IRA Tax Bomb for Heirs: This is an advanced planning strategy for retirees with large pre-tax IRAs or 401(k)s who know they won't spend all their money. Under the SECURE Act, non-spouse beneficiaries (like your children) must inherit and pay ordinary income taxes on the entire pre-tax account balance within 10 years. This can possibly push some high-income heirs into the highest tax brackets. A strategy championed by experts like Ed Slott involves using some of your annual Required Minimum Distributions (RMDs) to pay the premiums on a permanent life insurance policy. Since life insurance death benefits pass to beneficiaries income-tax-free, this strategy effectively leverages taxable RMDs into a tax-free legacy, replacing the heavily taxed IRA asset. This is a complex strategy (and more concentrated bet) that isn't applicable to most, but for the right HNW family it could be worth a discussion.
3. A Strategic Gift for the Next Generation: Finally, an overlooked opportunity is buying life insurance for a child or grandchild. A young adult in their early working years with a new family has a high need for life insurance protection but may find it difficult to carve out enough of their tight budget for an appropriately sized term life insurance policy. A parent or grandparent can step in and fund this for them. It’s a practical, highly valuable financial gift that provides peace of mind for the entire family.
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What a wonderful question with a complicate answer! In full disclosure, I (Garrett Crawford) am a CERTIFIED FINANCIAL PLANNER™ professional practicing at a fee-based independent Registered Investment Advisory firm (Providence Wealth Management, LLC) in Knoxville, TN. I hold a Life & Health Insurance license, and because I work at a fee-based firm, I am allowed to sell and implement insurance policies for my clients.
If I recommend and implement an insurance plan for a client, there is a Material Conflict of Interest because our firm receives a commission on that policy. This conflict must be—and is—fully disclosed to clients when a specific insurance recommendation is made.
We operate as a fee-based firm for two primary reasons: (1) Our company’s roots are in long-term care insurance planning from the early 1990s, giving us niche expertise in this complex field that we still desire to maintain; and (2) Our clients appreciate and trust us to implement insurance when it's in their best interest, valuing the simplicity of having their entire financial plan handled in one place.
In reality, I think advisors talk more about this issue than most of our clients do.
The Fee-Only vs Fee-Based Debate
There is another model known as fee-only that has gained traction over the past decade. Fee-only firms go an extra step to eliminate commissions entirely by outsourcing insurance purchases to third-party agents, aiming to minimize any potential conflict of interest. I am a fan of the fee-only model, but it also has potential downsides. Sometimes, because of the friction involved in bringing in an outside agent, fee-only advisors can be biased against insurance solutions, favoring investment management strategies even when an insurance product might be the appropriate tool.
The Bottom Line on Integrity
This conversation is often beaten to death within our industry. For the high-net-worth retiree, here is what it boils down to, in my opinion:
Insurance products generate commissions for someone; that is simply how the industry operates. A set of rules, codes of ethics, or guidelines—whether for a fee-only advisor, a fee-based CFP®, or an insurance agent—will not prevent a person with low integrity from acting in their own self-interest, even under a fiduciary standard. Conversely, I believe someone with high integrity can serve their clients exceptionally well in any of those environments. However, at the same time, I very much hold in tension the importance and necessity/helpfulness these consumer protections provide.
Your Checklist for Evaluating an Advisor
Yes, fiduciary financial planners can and do sell and facilitate insurance transactions. To navigate this, I encourage HNW retirees to look deeper than the labels and incorporate the following tenets into your decision making framework:
Seek Demonstrable Integrity Above All Else: Look for a track record of putting clients first. I realize this is obvious but the hardest thing to do or know, so the following areas might be helpful:
Demand Transparency: Ask your advisor directly: “How much commission is involved in this recommendation, and how do you balance that conflict of interest?” Better yet, a trustworthy advisor will bring those answers to you before you even ask.
Test the Planning Process: How much actual financial planning went into this specific recommendation? Does the presentation feel designed to pressure you into a quick decision? Is the product painted only in a favorable light?
Ask for Alternatives: Have you been presented with different insurance options? Or, if working with a fee-only advisor, have you been given any insurance options as alternatives to pure investment strategies?
I believe the hallmarks of a trustworthy financial planner are demonstrated through deep competence in insurance planning, clear disclosure of conflicts, having a diverse set of financial tools in their toolbelt, and the ability to clearly articulate both a recommendation and its viable alternatives.
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This is a great question that I encounter far too often. While the fees and restrictions of an income annuity rider are vital to understand, let me challenge you first with a different question.
Did the person pitching this product ask to review your latest tax return?
If they haven't reviewed your most important financial document, why trust their advice? I am not opposed to annuities or income riders in principle. However, if the goal is truly “efficient income,” your feelings about risk must be weighed alongside the hard data of your entire financial picture. Too often, fear—rather than comprehensive planning—is the sole driver behind these recommendations.
Full Episode Transcript
Adam: Good morning and welcome to Retirement Tax Matters. I'm Adam Reed, and this is Garrett Crawford, our CFP. How are you doing, Garrett?
Garrett: I'm doing pretty good today, Adam, ready to talk about insurance?
Adam: Wow. Nothing gets me out of bed like that! I told you this: we're trying to potty-train a three-year-old at night right now, so I didn't sleep much last night. But I actually woke up pretty well this morning. Normally, it takes me a minute to get going, but I think it must have been in the back of my mind that I get to come to the office and talk about insurance today.
Garrett: Yeah, it'll get you out of bed in the morning. I'm looking forward to it. This should be a fun conversation.
Adam: Yeah. I kind of cut my teeth in the insurance space before I moved into financial advising and then over here. It was always the funniest joke to people. I'd talk about life insurance and say, "Hey, a fun date night idea: have a glass of wine, sit down, enjoy a nice meal, and just talk about what you would do if the other person died. How would you spend your money? How would you do things?" It's always a nice, light topic for people to discuss over dinner.
Garrett: Our Medicare one went longer than I anticipated. I really don't think of myself as a Medicare person, and then we were 30 minutes in. That was cool.
Adam: It's like you uncover one thing and it leads you to another, and you just keep going. So, insurance. I think when most people hear "insurance," there's probably an initial gut reaction of, "that stuff is a waste of time," or, "you have to have it." One of the phrases we hear in our industry is being sold insurance versus buying insurance. Sold versus bought. Give me some insight into your thoughts when you hear about somebody who was sold a policy versus somebody who bought a policy.
Garrett: It is very interesting being a practicing financial planner. One of the things I've learned through the years is to try to conquer my biases as a financial planner. It's good to believe in certain things. It's good to make recommendations when people are stuck. But I think one of the hallmarks of a good financial planner is helping people do what they would want to do if they knew everything that I knew. My goal is not to get every one of my clients to believe exactly what I believe. Instead, some clients are going to like insurance, and some people are going to be anti-insurance. Trying to put somebody that hates insurance into an insurance product—maybe it's an annuity, maybe it's life insurance—people are just geared towards it, and sometimes people aren't. I think having this conversation about insurance planning is really important. I'm a Certified Financial Planner, and for a lot of the people that are listening, they may not know you're working through the CFP program. You're in the insurance planning section right now, in the thick of it. When I was taking the CFP, one of the core modules was insurance planning. There's one called retirement planning, one called tax planning, estate planning, budgeting. I remember going through the CFP insurance planning section, and it opened up my eyes wide to the fact that as a Certified Financial Planner, and really as a good financial advisor to our clients, I want to be well-informed about all the different insurance products that are out there so that I know when it's a fit and when it's not. I think some people believe that when you're considering a life insurance policy, an insurance policy, or long-term care insurance, you need to go to an insurance agent to get that. One of the things I really enjoy about what we do here is that we can help facilitate the purchase and transactions of insurance. Some places can; some places can't. But I think I approach the insurance planning question from a more comprehensive, 50,000-foot level. I don't get stuck too many times in an in-depth conversation about how a variable life insurance policy is totally different than a universal life insurance policy. Instead, it's more about, "Is term life insurance going to be the most appropriate given your goals? Or maybe will a permanent, cash-value life insurance be more appropriate?" But the planning side is really important. This whole discussion we're about to have today is about what the difference is between visiting with a financial planner who's going to help you do insurance planning versus going to an insurance agent's office or maybe an advisor where you feel like they're trying to sell you a life insurance policy. I think it would be good to focus today on the differences between planning and what people often feel is that they're being sold an insurance policy.
Adam: I like what you said at the beginning, because this goes for anything we do as a financial planner, and for anybody that's watching or doing it yourself. There have never been more tools in the financial toolbelt. There are new products every year. There are things that have gone out of fashion that are coming back into fashion. Structured notes are something we utilize a lot, and apparently those were hot around 2000 and kind of fell off, and now they're the cool thing on the block again. There are so many things out there, but I think specifically with insurance, you mentioned you like to help people make the decision they would want if they knew everything you knew. What are some of the things that you wish clients would know or you help clients to know or educate them on when they're thinking about the insurance space? I know it's a big question because we have life insurance, annuities, and long-term care insurance. Maybe just pick one of those and focus for a minute on what your thoughts are when you think about risk mitigation and how you can serve people well in that space.
Garrett: That's a great question. I wish people asked that more, honestly. A lot of times people will come into the conversation, and sometimes our bias prevents us from even wanting to engage on that question: "Should I have some type of insurance or should I not?" I would say, let's zoom back out. Who is the person listening to this podcast? It's going to be somebody that's either getting close to retirement, thinking about retirement, or maybe they're in retirement, and what we call "high net worth." Usually, high net worth means that your situation is a little bit different than maybe the friends that you run around with. Maybe you have more money saved; maybe you don't need as much as you have. We're thinking about that person in the $2 million to $8 million range. There are other groups of retirees that have more money, "ultra high net worth." That's a different insurance planning conversation. But in terms of rules of thumb with life insurance, annuities, and long-term care insurance, I get the question all the time: "Should I have life insurance?" There are lots of different types of life insurance policies: term life, universal life, variable life, guaranteed term. Generally, I would say you probably don't need life insurance if you have more money than you need saved. If you struggle each year figuring out how you're going to use your money—we have an episode called "The Six-Figure RMD." Just because you're high net worth doesn't mean that you're actually high income or have a high standard of living. Generally speaking, a lot of the clients that we're helping are not going to have a need for term life insurance anymore. I do think there's a conversation to have for some people with permanent life insurance, cash value life insurance, but those are going to be few and far between. There's going to be, probably, the most stereotypical one: let's say you're a mom and dad, you have a few kids, a couple of them are doing great, but you have one kid with a disability or some issues where you know you're going to need extra money when you pass so that you have quality of care for your child. I think there's a valid conversation to have for life insurance there. Or maybe you're in your fifties, and you're already at that $7 million or $8 million range, and there is nothing but time ahead of you. What I find about a lot of people is that they get to that level of wealth because they have a hard time spending money. They're just natural savers. If you're sitting at $8 million today and you have a bad habit of not spending that money, if you're in your fifties, you're probably looking, or at least you might be in an estate tax situation, even with those numbers being really high. So, making sure that you're doing everything that you can to avoid a 40% estate tax. When I think about insurance planning, I would start off with somebody that's in this high net worth space: "Let's do an inventory of all the different insurance policies that you own." We don't do this as much as I would like, and I'm not advocating that we go super deep on this, but I think it's important for people when they talk to their advisor, like us: bring your car insurance in, bring your home insurance in, bring whatever life insurance policies that you have. If you have an annuity, anything that's with an insurance company, bring it in so that your financial advisor, your financial planner, is aware of it. Your conversations that you're going to have about tax planning and whether you need it—you might find out that your advisor and you both agree this was something that you took out four or five years ago, and maybe it was a good decision then. But we see these time and time again where maybe somebody bought an annuity, maybe somebody bought some life insurance, and then they kind of get 10 years down the road and they're like, "You know, I'm paying for an income rider. I don't need this. It's kind of expensive. My life circumstances have changed. I'd rather just put it in the market and let it grow. I'm okay if it loses some money, but I think long term we'll come out ahead." Be willing to have a conversation about whether that's still a fit or not. You might do something called a 1035 exchange of that life insurance or annuity into a different product that would be better off for you. So I would say, the more conversations the better. I had one more little anecdote. I've told you this before, but this is maybe not a huge deal, but I would say anybody out there watching this, I remember one of my big takeaways from the CFP program was they'd always say if there was a question about umbrella policies, that was always the answer. So, I would say most of our high net worth people that are listening: Do you have an umbrella policy? Have you ever thought about having one? They're not super expensive, but you should probably consider having an umbrella policy. If you don't know what it is, maybe we'll do a whole episode on that in the future. We joke a lot sometimes that whatever the issue is, the umbrella policy always covers everything.
Adam: I like that. I think it is just an interesting conversation as well because I think there are a lot of general rules of thumb with investing that make a lot of sense, but insurance, in my opinion, is so goals-oriented. The person that's got $8 million in an IRA right now, their goal may be, "Hey, I don't have any kids," or, "My kids are grown, and one's a surgeon and one is a real estate empire over here, and I don't need to leave any of this." And maybe one is, "Hey, I can't spend all this. I lost my spouse. I'm on my own. There's no way I can spend all this." Maybe some permanent life insurance does make sense to get that to the next generation very efficiently. For me, for example, I'm in my twenties. I have a buddy who is a single guy in his twenties. He just doesn't need a whole lot of life insurance right now. He rents, he owns his car outright. He just doesn't have anything on the balance sheet. I'm married with three kids and a mortgage, and I love my wife to death, but she has a Spanish degree, and if she was on her own tomorrow, it would probably be pretty tough. I have a lot of life insurance, a lot of term life insurance, because that is really important to us; that's a priority for us to protect our family if something were to happen to me. This other guy isn't doing anything wrong in life; he just doesn't have those same things he needs to protect. I think that's the important thing: if you have policies that you're needing to review or you're sitting down with an advisor or an insurance agent, ask the question, "Why do I need this? Or why is this important to me?" If the answer is, "I don't know why," then maybe pump the brakes. I'm not saying you shouldn't do it. Maybe you do have a blind spot. Maybe you need some more education on the topic. But if you don't know why you have something, that's probably a good little indicator that maybe you need to ask a few more questions or review this or get a second opinion. I've seen time and time again people come in and say, "Hey, what does this do? How does this work?" It's shocking to me how many people will come into us with products they bought throughout the years and say, "What is this?" I'm like, "You put that much money into something?" It happens.
Garrett: To kind of bring this full circle, and I look forward to diving into different insurance policies in the future, usually those people that come in and say, "Here's what I got. I don't remember what it is or how it works," are symptomatic of somebody being sold something. They bought something that they really didn't know that they needed, and somebody, maybe they went to a seminar, maybe they ended up going to an office, and they bought this policy. Actually, it could be a great fit for them. The person that we were working with the other day came to a workshop. They brought in an annuity with an income rider. They didn't even know that there was an income rider on it. We were like, "Why don't you use this for income?" He just didn't know what he had. I think for anybody that's listening, if I was out there, I would want to go through the process of insurance planning with a financial planner that saw my whole picture. They knew how much money I had invested. They knew what was happening on my tax return. They understood the relationships that are going on with my family. They kind of know my long-term financial goals. For a lot of people out there that do it themselves, you're going to know the answers to those questions. But often, there can be blind spots that you haven't thought of. I think that's the value of working with an advisor. Insurance planning takes into consideration all those multifaceted issues that you're working through, and it helps you cut through the wheat from the chaff of what is an appropriate insurance policy for you. I think it's just a fun part of the financial planning process that some people can be jaded against because they just don't want another insurance policy. I would challenge people. I had a CFP class when I was getting certified many years ago, and the instructor made a comment I'll always remember. He said, "You know, many years ago I learned that life was more than term insurance and Roth IRAs." I love term insurance. I love Roth IRAs. That's predominantly what I'm working with clients on. I would say term life insurance and Roth IRAs are what I'm working on with clients 50 to one. But there is a wonderful place for having all the tools in your toolbelt and working with somebody who is not salary-dependent on selling you that one product that's all they have access to. I guess I would leave it at this: I think insurance planning is really important. Reviewing, getting second opinions, and learning when you don't need it and when you might need something else.
Adam: I think we'll kind of land the plane here, but planning for life to go right, but also having the correct things in place for when life goes wrong. Just make sure you're protected from those things. That's the big point. A lot of the people we're talking to are high net worth; they're toward the end of that, so they've mitigated a lot of those risks. But there still is the long-term care insurance, some of those things—outliving your money.
Garrett: I think that's probably one of the biggest ones. Sometimes people don't want to have that conversation, but I do think about how you would pay for extended care in retirement. We talked about it last week in the Medicare episode. That's uncomfortable for anybody. It doesn't matter how many millions you have in your IRA; you might not want to see all of that money dwindle away to pay for extended care.
Adam: What a great note to end this on! "Hey, your retirement's derailed. You're stuck in assisted living." No, but it is important. It's important to have those conversations and plan around it. That's what we're here for. We like to talk about these things and educate on the good, the bad, and the ugly—different tools that we have in our toolbelt. This week, we talked a little bit about insurance. We appreciate you guys joining us. Check us out on YouTube, Spotify, Apple Music. Like, subscribe, follow all the things. We appreciate you all joining us and hope you have a great rest of your day. I'm Adam Reed, this is Garrett Crawford. This is Retirement Tax Matters.