Captives

 So I went to the Drugstore and bought orthodontal wax. It's great - like chewing

gum only waxy - and covers the point on my piece of tooth nicely. The pain is gone

and I can talk normally! I am currently sipping Diet Ginger Ale with a straw, feeling

on top of things again.

And then, the annual Inurance bill for my rental appartment came in. A mere 15% higher 

than last year. I am close to feeling relieved; it could have been anything. Don't tell the Bank!

Had a bit of a chat with Copilot about insurance and the Rich. Below:

Do very rich people - from the billionaire class - actually buy insurance for anything, or do they invest in Insurance Companies...

Short answer:  

Yes — billionaires absolutely do buy insurance, but they buy it very differently from ordinary people. And yes — many of them also invest in insurance companies, because insurance is one of the most profitable, stable, cash‑rich industries on Earth.

Let’s break it down in a way that matches how the ultra‑wealthy actually behave.

🧠 How Billionaires Handle Insurance (Reality, not myth)

1. They do buy insurance — but only for catastrophic, unbounded risks

Even someone worth $1B doesn’t want to self‑insure against:

A $200M lawsuit

A $500M yacht fire

A $50M art theft

A plane crash liability claim

A wildfire destroying a $100M property

These are risks where:

The loss is unpredictable

The loss could exceed even a billionaire’s liquidity

The legal exposure is enormous

So they buy:

High‑limit liability insurance (umbrella policies up to $500M+)

Private aviation insurance

Super‑yacht insurance

Kidnap & ransom insurance

Art and jewelry insurance

Specialty property insurance

These policies are often custom‑written by:

Lloyd’s of London

Chubb

AIG Private Client

PURE Insurance

💼 2. They don’t buy insurance for small or predictable risks

A billionaire will not bother with:

Extended warranties

Travel insurance

Phone insurance

Small property insurance

Minor health deductibles

Why?

Because they can self‑insure anything under $1M without blinking.

They treat small losses as a rounding error.

🧱 3. Many billionaires invest in insurance companies — because insurance is a money machine

Insurance companies are some of the most profitable businesses ever created.

Why?

Insurance companies collect premiums now and pay claims later.

This creates something magical called float — billions of dollars they can invest before they ever have to pay it out.

Warren Buffett built Berkshire Hathaway on this principle.

Billionaires invest in insurance because:

It produces steady cash flow

It grows even in recessions

It benefits from rising interest rates

It has predictable actuarial math

It’s a regulated monopoly in slow motion

This is why billionaires own:

Berkshire Hathaway (GEICO, National Indemnity, etc.)

AIG

Chubb

Munich Re

Swiss Re

Lloyd’s syndicates

Some even own private insurance captives — essentially their own mini‑insurance companies.

🏛️ 4. Many billionaires create their own insurance companies (captives)

This is the most “billionaire” move of all.

A captive insurance company is:

A private insurance company

Owned by the wealthy individual or their family office

Used to insure their own assets

Why they do it:

Tax advantages

Control over underwriting

Ability to insure unusual risks

Ability to keep the profits from premiums

This is extremely common among:

Real estate families

Oil & gas families

Large private business owners

Tech founders with complex risk profiles

🧩 5. The ultra‑rich use insurance as a wealth‑preservation tool

Insurance is not just about risk — it’s about protecting dynastic wealth.

They use:

Life insurance for estate planning

Insurance trusts to avoid estate taxes

Key‑person insurance for businesses

Liability shields to protect assets from lawsuits

Insurance becomes part of the architecture of their financial fortress.

                                                                                 

They don’t avoid insurance — they optimize it.

If you want, I can go deeper into:

How billionaire insurance differs from millionaire insurance

How captives work (and why they’re legal)

Why insurance companies are such powerful investments

How ordinary people can use some of the same strategies

Just tell me which direction you want to explore.

How might ordinary people use some of these strategies?

Absolutely, Louise — ordinary people can borrow several billionaire‑grade insurance strategies, but scaled to normal life. You don’t need a family office or a $100M yacht to use the same logic. The trick is understanding which risks to transfer and which risks to self‑insure, and how to use insurance as a financial tool, not just a bill you pay.

Below is a clear, structured breakdown tailored to someone living in Québec, where insurance rules, deductibles, and tax structures differ from the U.S.

🌱 1. Self‑insure the small, predictable stuff (like billionaires do)

This is the easiest and most powerful strategy for ordinary people.

What this means in practice

Stop buying:

Extended warranties

Phone insurance

Appliance protection plans

Travel cancellation insurance for cheap trips

“Protection plans” at checkout

Low deductibles on home/auto insurance

These products are priced to be profitable for the insurer — not for you.

Why this works

You’re essentially saying:

“I’ll cover the $200–$1,000 losses myself, and I’ll insure only the big stuff.”

This is exactly what wealthy people do.

Québec twist

Raising your home or auto deductible from $500 → $1,000 or $2,000 can reduce premiums significantly because Québec insurers reward higher deductibles more than many provinces.

🧱 2. Insure only the catastrophic risks

This is the billionaire mindset:

Transfer the risks that could destroy your finances.

For ordinary people, that means:

Liability insurance (very cheap, extremely important)

Home insurance (fire, water damage, liability)

Auto insurance (civil liability is mandatory in Québec)

Disability insurance (most overlooked, most important)

Term life insurance if someone depends on your income

These are the “financial ruin” risks.

Why this matters

A house fire is a $400,000 loss.

A lawsuit can be $1M+.

A disability can wipe out decades of income.

These are the risks you never self‑insure.

🧩 3. Use insurance as a wealth‑preservation tool

This is where ordinary people can copy the ultra‑rich in a scaled‑down way.

Examples

Umbrella liability insurance

Costs: $150–$300/year

Coverage: $1M–$5M

Protects your home, savings, and future income from lawsuits

Term life insurance

Used by wealthy families to protect heirs

For ordinary people: protects dependents and avoids forced home sales

Disability insurance

Billionaires insure their earning power

Ordinary people should too — it’s more important than life insurance for most

🏛️ 4. Create your own “mini‑captive” through a self‑insurance fund

You can’t legally create a captive insurance company unless you’re a business owner, but you can mimic the logic.

How to do it

Create a dedicated savings account labeled:

Self‑Insurance Fund

Use it to cover:

Deductibles

Small losses

Repairs

Emergencies

This lets you:

Raise deductibles

Reduce premiums

Stop buying junk warranties

Build a cushion that grows over time

This is the ordinary‑person version of a billionaire’s captive.

💼 5. If you own a small business, you can use real captive‑style strategies

This is where things get interesting.

Québec small business owners can:

Insure unusual risks through a micro‑captive (if structured properly)

Deduct premiums as a business expense

Build reserves inside the captive

Use it for risk management and tax planning

This is advanced, but it’s the closest ordinary people get to billionaire insurance architecture.

📈 6. Invest in insurance companies (indirectly copying billionaires)

This is not a recommendation — just an explanation of the logic.

Billionaires love insurance companies because:

They generate stable cash flow

They profit even in recessions

They benefit from rising interest rates

They have predictable actuarial math

Ordinary people can access the same category of investments through:

Broad market index funds that include insurers

Financial sector ETFs

Dividend‑focused ETFs

This gives you exposure to the same business model without picking individual stocks.

(Not financial advice — just explaining the mechanism.)

🧠 7. Use insurance to reduce taxes (yes, even in Québec)

Québec has specific rules, but some strategies still apply:

For individuals

Permanent life insurance can be used for tax‑efficient estate transfers

RRSPs and TFSAs can be combined with insurance for estate planning

Insurance can protect assets from certain types of claims

For business owners

Corporate‑owned life insurance

Buy‑sell agreements

Key‑person insurance

Tax‑efficient wealth transfer to heirs

These are the same tools wealthy families use — scaled down.

🔍 8. The billionaire mindset in one sentence

Self‑insure the small stuff, insure the catastrophic stuff, and use insurance as a strategic tool — not a reflex purchase.

If you want, I can map this to your specific situation

For example:

Which risks you should self‑insure

Which catastrophic risks matter most in Québec

How to structure a personal “self‑insurance fund”

How to reduce premiums without reducing protection

How to use insurance for estate planning in Québec

Just tell me the direction you want to explore next.

How can insurance be used for estate planning?

Here’s the clear, grounded answer, Louise — insurance is one of the most powerful estate‑planning tools available to ordinary people, and Québec’s legal/tax structure makes some of these strategies even more effective.

I’ll give you the practical, real‑world version, not the sales‑pitch version.

🌿 1. Life insurance creates instant estate liquidity

When someone dies, their estate often faces:

Taxes

Final expenses

Probate delays

Debts

Property that can’t be sold quickly

Life insurance solves this by creating tax‑free cash at exactly the moment it’s needed.

Why this matters in Québec

Québec has:

No estate tax

But income tax on RRSP/RRIF at death

Capital gains on certain assets

Probate delays (liquidators can wait months for access to funds)

Life insurance gives heirs immediate money so they don’t have to:

Sell the house

Liquidate investments at a bad time

Borrow money

Fight with banks

This is the most common estate‑planning use.

🧱 2. Insurance bypasses the estate entirely (avoids probate)

In Québec, if you name a beneficiary on a life insurance policy:

The money goes directly to the beneficiary

It does not pass through the estate

It cannot be seized by estate creditors

It avoids probate delays

It is tax‑free

This is a very “billionaire‑style” move, scaled down.

It creates a private, protected transfer of wealth.

🛡️ 3. Insurance protects heirs from taxes on registered accounts

When someone dies with:

RRSP

RRIF

LIRA

LIF

The entire value is treated as income in the year of death (unless transferred to a spouse).

This can create a huge tax bill.

How insurance helps

A simple term or permanent policy can be used to:

Cover the tax bill

Prevent forced liquidation of investments

Preserve the full value of the estate

This is extremely common in Québec because RRSPs are heavily used.

🧩 4. Insurance can equalize inheritances

This is a trick wealthy families use constantly.

Example:

One child inherits the house

Another child inherits the business

A third child gets nothing equivalent

Insurance can be used to give the “non‑asset” children an equal share.

This avoids resentment, legal disputes, and forced sales.

🏛️ 5. Insurance can protect a disabled or vulnerable heir

Québec has strong protections for:

Disabled adults

Children with special needs

Heirs who cannot manage money

A life insurance policy can be directed into:

A Henson trust (discretionary trust)

A testamentary trust

A protective trust

This ensures:

The heir is supported

The money is managed responsibly

Government benefits are not lost

This is one of the most humane uses of insurance.

🌲 6. Permanent insurance can be a tax‑efficient wealth transfer

This is the closest ordinary people get to a “billionaire strategy.”

Permanent life insurance (whole life, universal life) grows:

Tax‑sheltered

With guaranteed values

With no tax on payout

For people who:

Have maxed RRSP/TFSA

Want to leave money to children or grandchildren

Want a predictable, tax‑efficient transfer

…it can be a powerful tool.

This is not about investing — it’s about tax‑efficient inheritance.

🧠 7. Insurance can fund a succession plan for a small business

If someone owns a business, insurance can:

Fund a buy‑sell agreement

Protect the business from collapse

Provide liquidity to buy out partners

Cover taxes on shares at death

This is the “business owner” version of estate planning.

🪨 8. Insurance protects the estate from lawsuits or creditors

In Québec, life insurance with a named beneficiary:

Cannot be seized by creditors

Cannot be taken in bankruptcy

Cannot be claimed by estate creditors

This is a quiet but powerful form of asset protection.

🌼 9. Insurance can be used to leave a charitable legacy

A small policy can create:

A scholarship

A donation to a hospital

A gift to a cultural institution

This is how ordinary people create a legacy that feels “larger than life.”

🌟 The essence of the strategy

Insurance is not about replacing income — it’s about creating liquidity, protecting heirs, and transferring wealth efficiently.

It’s one of the few tools where ordinary people can use the same architecture as the ultra‑rich, just scaled to their life.

If you want, I can map this to your situation in Québec

For example:

Whether a self‑insurance fund + term insurance is enough

How to structure beneficiary designations to avoid probate

How to protect heirs from RRSP/RRIF taxes

Whether permanent insurance makes sense for legacy planning

How to simplify everything so your estate is easy to administer

Just tell me the direction you want to explore next.