Premium Financing

What is Premium Financing?
Is a method in which a person can use monies lent (financed) for the purposes of purchasing a life insurance contract on their life. A contract is put in place between the borrower (insured) and a lender (institutional firm), not a policyholder and an insurance company. The loan is agreed to be repaid plus any interest and fees at the end of the loan period.
Advantages of Premium Financing:
Increased Cash Flow
By taking out a loan to pay for the insurance, the insured can avoid paying premiums out of pocket, providing more freedom and liquidity. The monies can stay invested or available for other needs. In many cases earning higher interest than what the loan interest is on the outstanding financed loan.
Increased Cash Flow
By taking out a loan to pay for the insurance, the insured can avoid paying premiums out of pocket, providing more freedom and liquidity. The monies can stay invested or available for other needs. In many cases earning higher interest than what the loan interest is on the outstanding financed loan.
Consolidated Insurance Payments
If the insured has several policies the premiums for all can be combined into one allocation.
Using Bank Money to Pay for Life Insurance
Many high net worth people have a need for large life insurance polices. Between paying large premiums out of pocket, gift tax laws and restrictions, and the lost use of the premiums in other investments these needed policies never end up being purchased.
The programs that Brokerage Professionals, Inc. represents are NOT non-recourse or free insurance programs. The majority of the programs with which Brokerage Professionals, Inc. work with require the insured to put up a percentage of the premium, collateral, letter of credit, personal guarantee or a combination of these features.
The majority of these programs are working with clients: Males in the 75+ age range and Females in the 70+ age range. These clients should be at a minimum of a Standard risk from the Insurance underwriting standards. There are some programs that are available at younger ages.
Premium Financing Programs Can Be Structured To Fit Many Needs
Estate Planning: Premium financing works as a funding tool for future estate tax liabilities.
Charitable Planning: Donors have limited resources to give to their favorite charities. Typically Life insurance provides a large contribution after death in the future but the charities like the donations in today’s dollars. Premium financing allows the donor to continue with current gifts to the charity and establish a life insurance policy for large future endowments.
Buy/Sell: Premium financing can ease the cost of funding buy/sell agreements whether it be cross purchase, stock redemption, or a family transaction. Installment sales can also be replaced with life insurance premium financing plans.
Key Man: Premium Financing can take the place of some of the complex split dollar arrangements.
Dynasty Trust Revitalization: As family trust assets become reduced through distribution or taxation, premium financing can allow a family to obtain a large life insurance policy to fund up the family legacy.
Revenue Stream: Typically used for small / medium sized businesses when financing an insurance product with high cash value potential. This allows for life insurance to be financed (similar to key man coverage) but accelerated loan exit leave cash building up at the time the revenue is needed (retirement or other) income streams can be obtained from the cash value of the policy while still preserving a death benefit as well. Under current tax laws these income streams could be available tax free providing the policy does not lapse. Consult your tax advisor for clarifications we are not tax experts and do not provide tax consultations.