Use this page to understand the idea, connect it to asset structuring, and continue into the next relevant ASC learning resource.
The cash flow problem
Many high net worth families and business owners understand the value of permanent life insurance for estate planning, family protection and legacy. The challenge is funding large premiums without reducing capital available for the business, investments or family lifestyle.
An Insured Financing Arrangement studies this tension. Instead of viewing premiums only as an expense, IFA treats the policy’s growing cash value as collateral that may support borrowing from a Canadian financial institution.
How IFA works
The IFA sequence
Acquire the correct insurance
The policy must fit the family’s estate, business and liquidity objectives.
Build collateral value
Capital is paid into the policy so cash value can support a lending relationship.
Secure financing
The lender reviews the policy, borrower and collateral before approving the line of credit.
Use capital with discipline
Borrowed funds may support business, personal or planning purposes, but leverage must be monitored.
Why families study IFA
- Life insurance remains in place for estate and family protection.
- Policy cash value may support liquidity instead of locking capital away.
- Borrowed funds may support business investment, personal needs or additional planning.
- Interest treatment may create planning opportunities where tax rules allow.
- IFA integrates insurance, banking, tax and estate planning into one conversation.
Risks and limitations
IFA introduces lender approval, interest rate risk, collateral requirements, possible tax rule changes and the need to maintain the policy over time. The family must understand what happens if cash value underperforms, interest rates rise, credit terms change or more collateral is required.
The advisor’s role
The advisor should not present IFA as free insurance. The professional question is: does the client need the insurance, can the policy support the intended collateral use, and have the tax, lending and estate consequences been reviewed?
Continue to TERC™.
After insured financing, study a US facing retained capital conversation for asset owners who need tax efficient planning.
Educational material only. IFA implementation requires Canadian tax, lending, legal and insurance professionals.