If a family wants to avoid a forced sale of equities, property, art or a private business during succession, what role can insurance play? The answer is not to identify one “best” policy. It is to ask first: what job must this money perform?
01｜LIFE PROTECTION
Life protection: solving for leverage
The core purpose of life protection is not investment return. It is to use a comparatively limited premium to secure a larger contractual death benefit, creating a source of cash triggered by a covered event.
Under Mainland China’s current Individual Income Tax Law, insurance indemnities are listed as exempt from individual income tax. That current rule is not a forecast of any future estate-tax regime. If an estate tax were introduced, the treatment of insurance proceeds would depend on the law then in force and on the policy’s ownership and beneficiary structure.
02｜PARTICIPATING LIFE
Participating life insurance: growth + protection + legacy
Participating life insurance combines death-benefit protection with the potential to accumulate cash value over time. Where the specific product permits, policy ownership, life insured and successor-insured arrangements may also help extend policy interests.
Fund future cash needs
Focus on the death benefit, payment conditions, currency, timing and certainty.
Support long-term growth and continuity
Focus on long-term policy value, continuity features and family arrangements.
For larger families, several policies can be assigned different functions from the outset instead of asking one policy to perform every job.
03｜CRITICAL ILLNESS
Critical-illness cover: health risk comes first
Its primary purpose is to address the cash-flow shock that serious illness can create for the insured and the family. A policy that includes a death benefit may add some legacy liquidity, but critical-illness cover need not be the principal tool for a large estate.
TOOL MAP
Three tools, three different jobs
Life protection
LeverageExchange premiums for a contractual death benefit and event-triggered liquidity.
Participating life
Growth + protection + legacyCombine death protection, long-term cash value and eligible continuity features.
Critical illness
Health liquidityPrioritise treatment, recovery and household cash needs during serious illness.
04｜LIQUIDITY PRINCIPLE
What insurance really protects against is a forced sale
In the real £10 million UK estate case, financing helped the family avoid an urgent disposal of core assets. Insurance and financing are not the same instrument, but they reveal the same planning principle:
Independent liquidity can separate the deadline to use cash from the decision of when to sell an asset.
The right question is therefore not which policy is universally best, but which job the money must perform. Life protection addresses leverage; participating life insurance combines long-term growth, protection and legacy objectives; critical-illness cover addresses health-related liquidity first.
Good wealth planning does not search for one universal policy. It gives every pool of capital a clear job.
How can a RMB 50 million family build RMB 10 million of legacy liquidity capacity?
The next article turns risk, funding and tools into a practical five-pool system.
Read the implementation guideSOURCES & CASE REFERENCE
- State Taxation Administration｜Individual Income Tax Law of the PRC (Article 4 lists insurance indemnities as exempt from individual income tax.)
- China estate-tax boundary: Ministry of Finance letter 财税函〔2017〕197号. Mainland China currently has no estate tax in force; historical rate tables circulated in the market are not legislation.
- Willow Private Finance｜£10m London estate financing case (published 22 April 2025; a lender-published client case, not a court judgment)
- GOV.UK｜Pay your Inheritance Tax bill
This article is for general wealth-planning education only and is not legal, tax, investment or insurance advice. Mainland China currently has no estate tax in force, and this article does not predict whether or when one may be introduced. Coverage, cash values, bonuses, payment conditions, timing and continuity features depend on the specific contract, insurer rules and actual claims outcome; bonuses and other non-guaranteed benefits are not guaranteed. Legal and tax outcomes may vary by jurisdiction, tax residence, ownership and beneficiary structure. Appropriate professional advice should be obtained.