Premium Financing
Premium Financing
High Net Worth & High Income Individuals may find premium financing an economical way to pay for life insurance.
Premium Financing is a method of paying for life insurance using annual loans from a Bank. Providing a lower opportunity cost by reducing initial out of pocket significantly and creating 2x to 3x the insurance benefit compared to traditional premium funding. Policy contract is designed to pay back Bank financing arrangement + Client receives net benefit amount.
Funding & Loan Mechanics
- Bank requires financial underwriting to qualify for loan arrangement.
- Loan interest tied to an index + a spread.
- Banks require Premium Financing to be fully collateralized.
- Loan paid back from:
- Policy proceeds pay back bank using Policy values for predetermined exit strategy.
- High net worth individual repays the loan out-of-pocket.
- Large inheritance
- Liquidity event
- Death
Benefits
- Not taxable in estate - Owned by an Irrevocable Trust minimizing estate taxes. Providing/Provides financial and estate tax liquidity to protect assets.
- Arbitrage when rates on borrowed funds are lower than growth earned on (Client) assets.
- Premium Financing allows personal assets to stay fully invested. Minimum impact on current Investment Portfolio, Business, or Real Estate Assets.
- Beneficial if Client is facing temporary asset liquidity issue.
Financing Cost
- Policy cash values remaining after paying back Premium Financing arrangement will be slightly lower than traditional premium funding.
- Loan and interest rates may vary.
- Some PF loans are determined for the duration of the financing.
- Others PF loans renew periodically.
Benefits
- Not taxable in estate - Owned by an Irrevocable Trust minimizing estate taxes. Providing/Provides financial and estate tax liquidity to protect assets.
- Arbitrage when rates on borrowed funds are lower than growth earned on (Client) assets.
- Premium Financing allows personal assets to stay fully invested. Minimum impact on current Investment Portfolio, Business, or Real Estate Assets.
- Beneficial if Client is facing temporary asset liquidity issue.
Financing Cost
- Policy cash values remaining after paying back Premium Financing arrangement will be slightly lower than traditional premium funding.
- Loan and interest rates may vary.
- Some PF loans are determined for the duration of the financing.
- Others PF loans renew periodically.
High Net Worth & High Income Individuals may find premium financing an economical way to pay for life insurance.
Premium Financing is a method of paying for life insurance using annual loans from a Bank. Providing a lower opportunity cost by reducing initial out of pocket significantly and creating 2x to 3x the insurance benefit compared to traditional premium funding. Policy contract is designed to pay back Bank financing arrangement + Client receives net benefit amount.
Funding & Loan Mechanics
- Bank requires financial underwriting to qualify for loan arrangement.
- Loan interest tied to an index + a spread.
- Banks require Premium Financing to be fully collateralized.
- Loan paid back from:
- Policy proceeds pay back bank using Policy values for predetermined exit strategy.
- High net worth individual repays the loan out-of-pocket.
- Large inheritance
- Liquidity event
- Death
Benefits
- Not taxable in estate - Owned by an Irrevocable Trust minimizing estate taxes. Providing/Provides financial and estate tax liquidity to protect assets.
- Arbitrage when rates on borrowed funds are lower than growth earned on (Client) assets.
- Premium Financing allows personal assets to stay fully invested. Minimum impact on current Investment Portfolio, Business, or Real Estate Assets.
- Beneficial if Client is facing temporary asset liquidity issue.
Financing Cost
- Policy cash values remaining after paying back Premium Financing arrangement will be slightly lower than traditional premium funding.
- Loan and interest rates may vary.
- Some PF loans are determined for the duration of the financing.
- Others PF loans renew periodically.
