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Premium Financed Life Insurance Advantages in a High-Interest Rate Environment

Premium financed life insurance has distinct advantages in a high-interest rate environment where unpredictable market swings and inflation otherwise wreak havoc on your wallet and portfolio.  The last year and a half have seen record inflation decimate the daily living expenses and liquid capital of families across the United States.  

In order to avoid a hyper-inflationary spiral, the Federal Reserve has been raising interest rates dramatically from their previous historic lows.  Higher interest rates tighten the borrowing market and create challenges of their own.  Our money can feel essentially trapped between an inflationary rock and a high-interest hard space.  Premium financed life insurance can find safe haven in the narrow space between.  Let’s explore that a bit further.

Premium Financed Life Insurance Explained

On the surface, premium financed life insurance can seem complex when in reality, the process is quite straight-forward.  The reason people who require large life insurance policies with benefits $5 million or greater would choose a premium financed approach is simple.  

Would you rather pay $200,000 dollars a year or just 3% of that to maintain your policy?

I think the answer is obvious.  We would all rather keep our cash working for us and still have the policy we need to protect our family’s financial future.  

So, how is it possible to pay just 3% of your policy premium each year? 

It’s possible because you aren’t the entity paying the premium at all.  Instead, you have secured a loan from a lender (a large bank or other financial institution) and the lender is paying the premium.  You simply may be paying interest to the bank on the loan.

How is the loan repaid?

When you pass away, the money that is owed on the loan is paid out of the death benefit while your beneficiaries receive the rest.  

In today’s economic environment, why is premium financed life insurance a good idea?

Here’s where it gets interesting!  In order to secure the loan that pays the insurance policy premiums, the lender requires collateral.  The good news is that most lenders are quite flexible in the assets that they will allow to collateralize the loan.  For instance, a CD (Certificate of Deposit) can be used to collateralize the loan.  Let’s focus on that for a moment.

A Certificate of Deposit is a savings product that differs from a traditional savings account.  In a CD, your money will be untouchable for a certain period of time and during that time you will enjoy a higher interest rate return than you typically would on a regular savings account.  The good news is that when the Federal Reserve raises interest rates, savings, CDs, and other products are also affected as they see their interest rate returns rise in response.  

This means instead of being negatively impacted by rising rates and volatile markets, your money can be stashed in a safe CD (which is insured by the FDIC) and enjoy the increased value at higher rates!

photo of US currency representing money saved with premium financed life insurance

The cash growth of your life insurance policy may grow over time

In addition to collateralizing the loan with high-interest-friendly assets such as CD’s and procuring a large life insurance policy while possibly paying only the interest on the premium loan, the policy itself has the potential to grow in value.  

These can be whole life policies and their cash value grows as the market (such as the S&P 500 or other indexed markets) finds its footing again. 

This means that even though you are paying the interest on the loan, the asset of the policy itself becomes more valuable.  

a hand holding a bunch of cash

Tying it all together:  The Advantage of Premium Financed Life Insurance

To sum it up, people who meet the requirements for a premium financed life insurance policy can collateralize their loan using instruments that perform better during the current economic conditions of rising interest rates.  This alone makes premium financed life insurance worth considering.  

When combined with all of the other headwinds our economy is facing today, however, the ability to maintain your liquidity and keep cash in your account or your business while affording the protective insurance you need at a fraction of the cost to your wallet is priceless.   

Insurative would be happy to answer any questions you may have about premium financed life insurance policies and any other life insurance-related questions.  We are here for you!

You can contact us at 1-877-281-1311

The right time to buy life insurance. Image of a businessperson climbing stairs made out of coins

The Life Insurance Timeline: When should you buy life insurance?

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Life insurance is an important tool for protecting your family’s financial well-being in the event of your death.  Life insurance offers many financial benefits to you and your family.  From lump sum, tax-free death benefits paid directly to your loved ones, to cash accumulation, retirement assistance, and long-term care cost benefits as you move through life.  Think of life insurance as a multi-tool of protection for every stage in your life.  This begs the question:  When is the right time for you to buy a life insurance policy?  

The best time to buy life insurance is almost always today

This isn’t a sales pitch.  The truth is that the cost of life insurance increases as we age.  This is due to the fact that as we age, the risk of serious health issues complicates the ability for life insurance carriers to insure us.  At Insurative, we refer to this as ‘The cost of waiting”.  The longer you wait to purchase a life insurance policy, the more expensive and difficult it can be to obtain one.  

Each stage of our lives presents different needs and challenges when it comes to how we safeguard our financial future.  A college graduate embarking on a new career has different needs than a 50-year-old considering retirement.  Fortunately, the life insurance industry has robust offerings for people at nearly every stage of their lives.  Let’s take a look at different life needs and their possible solutions as we continue our journey through life.

Young couple drinking coffee outside. Represents the beginning of a life insurance purchase

What type of life insurance is right for people in their 20’s and 30’s?

Being young and healthy does not mean a person should wait to buy life insurance.  In fact, there are many factors such as loss of income, mortgages, sudden illness, and even death that impact younger people every day.  Life insurance can help alleviate the financial strain of these challenges.

How would your family survive if something happened to you?

Term life insurance is an excellent starter for many young people.  Term life insurance provides coverage for a specific period of time, typically 10 or 20 years. The policyholder pays an annual premium during this time and if they die during the term then the beneficiary will receive the death benefit amount. 

Term life insurance gives you the peace of mind in knowing that should you die prematurely, your family will receive a significant, tax-free death benefit that helps them cover outstanding debts, mortgages, and life needs.  Term life insurance can be purchased for less than 30 dollars per month for many young people and sometimes as low as 15 dollars per month.

An African American couple in their 50's contemplating life insurance needs as they age

Life insurance for people in their 40’s, 50’s, and 60’s

As we get older, our needs inevitably change.  Our children require tuition for college, our bodies are at greater risk for disease and illness, and our years of earning at our jobs begin to come to a close.  Suddenly, 20-year term life policy we purchased in our 30’s doesn’t reflect our net worth after decades of earning, saving, and investing.  

Permanent life insurance is a type of life insurance that provides financial protection for the insured for their entire lifetime.  Permanent life insurance acts like an investment product that has a cash value and provides protection against inflation.  Let’s look at some of the options in permanent life insurance.

Whole Life Insurance

Whole life insurance offers a safe haven for cash growth.  While the interest and returns on your premiums are conservative compared to other forms of permanent insurance, the returns are consistent throughout the course of the policy.  This allows for slow and steady growth undeterred by inflationary and market pressures.  

Indexed Universal Life Insurance

IUL insurance offers the potential for greater cash accumulation.  This is because the return is mirrored with a market index such as the Dow Jones Industrial Average or the S&P 500.  When the market wins, your return goes up.  These policies also have a floor which means that if the market underperforms you won’t lose money.  This is known as the ‘zero is your hero’ concept.  While not as steady as the more conservative Whole Life growth, IULs have become very popular as vehicles for cash accumulation over time  

An elderly woman contemplating retirement

When you are ready to make a life insurance decision, let us know how we can help

We believe that everyone is better protected if they have a life insurance policy in place.  At Insurative we believe that  No matter where you are at in your life journey, we are here to help you live your best life.  Contact us at 877-281-1311 or info@insurativeus.com.

 

a father holding his child representing the benefit of Term life insurance for families

Term Life to Permanent Life Conversion: The Power of Flexibility

We never truly know what the future has in store for us.  The risk of the unknown can be especially daunting when we have loved ones who depend on us for support.  Life insurance allows us to protect the financial future of our family and maintain peace of mind.  Term life insurance is often the first foray people make toward protecting their finances for their loved ones should they suddenly pass away.  It is an immensely popular insurance product due to its relatively low monthly cost compared to permanent life insurance.  However, there is a catch.  Term life insurance expires at the end of the term, leaving you uninsured.  Fortunately, it is possible to convert your term life policy to a permanent life policy and it may be possible to finance the higher premiums with a loan from a 3rd party lender.  Let’s discuss the benefits of term life insurance, permanent life insurance, and premium financing.

What is term life insurance and who should buy it?

Term life insurance protects the insured for a specific period of time.  For example, a term life policy may offer $500,000 dollars of death benefit for a term of 5, 10, 15, or 20 years.  This means that if the insured passes away before the end of the policy’s term, their beneficiaries would receive $500,000 dollars, tax-free.  

Every month for the duration of the term, the insured pays the premium amount of the policy.  This amount is determined by a number of factors including but not limited to:

  • The age of the policyholder
  • The amount of death benefit
  • The health status of the policyholder
  • The gender of the policyholder

For example, a 40-year-old female in good health who wants to purchase a 20-year policy with a $500,000 dollar death benefit might pay around $30 dollars/month for the duration of the 20-year term.

Term life is excellent for people who are looking for some peace of mind at a great value.  It is important to note that the older a person is, the higher the monthly premium will be.  Term life is an especially good value for younger people as the premiums are very low.  

a picture of an hourglass representing Term Life Insurance about to expire

What happens when my term life is set to expire?

At the end of a term life policy, the insured has 3 options.  They can either:

  1. Let the policy expire and do nothing about it.
  2. Purchase another term life policy.
  3. Convert their term policy to a permanent policy

Let’s take a look at each of these options.

Letting the policy expire

If a person lets the policy expire, then they will no longer be insured.  This means that if they were to pass away, their beneficiaries would not receive any money.  Term life is not a cash asset in the sense that the premiums are not innately recoverable.  This is one of the reasons that term life insurance is less expensive than a permanent life policy.  

Purchase another term life policy

If the insured opts to purchase another term life policy, the rates will likely be significantly higher as the insured is now older than they were when they purchased their first term policy.  There is also the health risk associated with aging.  The person may not be in the same health as they were when they purchased the original policy, which also would increase the cost of the insurance.

Convert their term policy to a permanent policy

This option allows the insured to remain insured by converting their term life policy to a permanent policy that follows them throughout the rest of their life.  Permanent policies such as Whole Life Insurance or Indexed Life Insurance are very different from Term policies.  

Permanent life insurance is an asset that can accumulate cash over time.  There are many advantages of permanent life policies due to their nature as cash assets.  Check out this article to understand the benefits of Whole and Indexed life insurance.  

While premiums for permanent policies are higher than term life policies, the benefit is that you are not risking losing your monthly premiums due to term expiration.  Additionally, there is the possibility for your premium dollars to grow at either a fixed return or an indexed return (which is mirrored by the index market such as the DOW, the S&P, and others).  A person with a permanent policy can borrow against the cash accumulated within the policy and use the money for other life needs as they arise.  While this flexibility comes at a higher monthly cost, some people may qualify for premium financing.  

a piggy bank representing premium financed life insurance

Premium financing as a tool to preserve liquidity

Premium financing is a process where the insured utilizes a 3rd party lender (such as a bank) to secure a loan in order to pay the premiums.  If the insured qualifies for the loan the Lender will pay the insurance premiums.  In return, the insured may pay the interest on the loan which is significantly less than the cost of the premium.  This allows the insured to enjoy the benefits and protection of a substantial life insurance policy without sacrificing their liquidity in the process.   To learn more details about premium financing, check out this article.  

Protection for life

A term policy is an excellent place to begin your life insurance journey.  With professional help from Insurative Risk Solutions U.S., Inc., you are able to roll your term policy into a policy that will last a lifetime.  Premium financing is a creative way to secure the protection you need for your family while preserving your cash for other life needs.  Let us know how we can help you take the next step toward securing your family’s financial future.  Call us at 877-281-1311 or visit our website at insurativeus.com.

stormy seas picture representing the difference between indexed life insurance and whole life insurance during inflationary periods

Whole Life vs Indexed Life Insurance During Inflationary Periods

Over the last two years, we have watched the price of goods and services skyrocket while the stock market has been more volatile than it’s been in many years.  From the Covid pandemic to supply chain and labor shortfalls, the country is mired in economic uncertainty.  The life insurance industry has seen increased interest as a steady ship in stormy seas these past years.  

Now that we are in a high inflationary period and stocks are down more than they are up, people are looking for safe places to put their money while also looking to secure the financial future of their families in the event of their death.  There has long been a debate between the merits of Whole Life vs Indexed Life insurance policies.  Let’s tackle the question of which type of insurance is best suited for these wild and unpredictable times.  

Examining the whole life vs indexed life insurance. Pic of two people looking through binoculars

Advantages of Indexed Life Insurance 

Indexed Life insurance offers the policyholder an opportunity to tie the value of their policy to a market index such as the DOW or S&P 500.  Typically, there is a “Zero is my hero” element embedded in these policies.  This means that if a market index does not post any gains for the quarter, the policy will not lose value, but instead will net no gains.  It should be noted, however, that fees associated with managing the policy will still be paid resulting in a slight loss to the policyholder.  

Conversely, when the market roars back to life again, the policyholder will enjoy a capped percentage of that growth.  This is the main appeal of Indexed policies.  They grow in value when the market is thriving and stay relatively neutral when the market is down.  

During an inflationary period with market volatility, however, indexed policyholders may not see gains in their policy value.  With the nation heading towards a possible recession, this may mean that Indexed Life policies will not see gains for many years  

Advantages of Whole Life Insurance

Whole Life policies are fiscally conservative compared to Indexed policies.  They are not tied to a market index and therefore do not enjoy increased value over periods of market upswings.  However, their greatest strength may lie in their consistency.  A Whole Life policy promises a small, but steady return on the value of the policy.  The average return in the United States on a Whole Life policy is around 1.5%.  While this may seem low, it is still higher than many interest-bearing savings accounts or money market accounts that banks offer.  

During an inflationary period and a down market, Whole Life policies represent a stable and reliable alternative to Indexed policies.  Whole life policies offer a calm in the storm, providing both peace of mind for the family of the policyholder as well a consistent return on the policy value.  

advantages of whole life insurance. Pic of a woman and her child at the beach during sunset

Premium Financing Can Ease the Inflationary Burden

Premium financed life insurance involves working with a 3rd party lender in order to obtain a loan that covers the cost of insurance premiums.  The policyholder may pay interest on the loan which allows them to retain more liquidity and financial flexibility.  Eventually, the loan can be paid off in full utilizing a portion of the death benefit when the policyholder passes away.  The remainder of the death benefit is distributed amongst the beneficiaries of the policy.  

Premium financing for life insurance can help ease the burden of high inflation because it leaves more cash in the accounts of the policyholder.  Premium financing is a way to obtain large life insurance policies without paying the premiums out of pocket.  The policy can be held by a trust or an individual and is an excellent tool for qualified applicants who wish to secure a significant policy without liquidating valuable assets.  

Insurative Can Help You Decide if Premium Financing is Right for You

Helping you decide whether premium financing is a good fit for your financial goals is what we do best.  If you are looking for a policy that will help you and your family weather the storm of today’s economic environment and the future challenges that life may present, contact a member of our team to have your questions answered.  We look forward to helping you bridge the gap between a tight market today and the promise of a bright tomorrow for your family. 

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Premium Financed Life Insurance: A Case Study

Insurative specializes in helping qualified clients obtain sizable life insurance policies while preserving their liquidity.  We work with carriers, lenders, advisors, and clients to leverage the power of premium financed life insurance to structure custom solutions that work for the client’s wealth and estate strategy.  

An affluent client has many different reasons for looking at innovative approaches to insuring their business or family’s financial future through premium financed life insurance.  Every client is different and their unique circumstances require each case to be designed to suit their needs.  For example, let’s take a look at a case where a premium financed life insurance policy helped a client obtain a $3 million dollar Indexed Universal Life policy.

Meet Jane…

Client Profile:

  • Jane
  • Female
  • 61 years old

Client Needs

  • Policy Flexibility 
  • $3 million dollar death benefit
  • Maintain as much liquidity as possible
  • Collateralize the loan using a separate, existing life insurance policy
  • Protect her estate from additional estate taxes

Jane is 61 years old.  She is a retired businesswoman with a sizable estate, including invested assets that she does not want to liquidate.  Like many people in her situation, Jane would like to have the peace of mind that her family’s finances will be secure should anything happen to her.  She is also a philanthropist.  In addition to leaving her wealth to her family, she is passionate about her charitable contributions and wishes to donate $1 million dollars to these endeavors.

The Policy

In order to protect her family’s future finances and gift her charitable donation, Jane works with her advisor and elects to look into a life insurance policy that will allow her to leave a sizable endowment to her heirs while gifting another $1 million dollars to her favorite charitable foundation.  In order to maximize flexibility, an Indexed Universal Life policy would allow for growth in the cash value of the policy over time, a tax-free death benefit, and leverage in the cash value.  Additionally, the policy will be held in an Irrevocable Life Insurance Trust (ILIT) so that the benefits of the policy are not figured into the estate.  

The Lender, the Premium, and the Collateral

A $3 million dollar IUL policy for a person of Jane’s age comes with a significant premium.  In order to maintain the policy, the yearly premium due could be well over $100,000 dollars.  Since Jane wants to retain her liquidity, she opted to work with Insurative to structure a premium financed life insurance solution.  

Insurative was able to help Jane structure a loan arrangement with a lender in order to pay the bulk of the premium due each year.  While the premium on the policy was over $191,000 dollars, Jane contributed only $25,000.  Additionally, she was able to further collateralize the loan using the cash value of an additional policy that she already owned.    

As you can see in the table below, Jane’s $3 million dollar IUL policy has a cash value that exceeds the loan balance after 5 years, while Jane pays less than 14% of the total premiums out of pocket and collateralize the loan with an existing asset.   When the loan matures, Jane may have the option to either renew the loan or use the cash value of the policy to repay it.

Year2017-20182018-20192019-20202020-20212021-2022
Beginning Loan Balance$717,729$965,358$1,196,359$1,426,672$1,659,684
Premium Paid$191,433$191,433$191,433$191,433$191,433
Client Contribution$25,000$25,000$25,000$25,000$25,000
Interest Rate5.36%5.40%4.45%3.25%4.71%
Loan Interest Deferred$49,408$63,334$62,614$53,319$88,399
Ending Loan Balance$941,692$1,205,536$1,435,699$1,655,188$1,929,047
Policy Cash Surrender Value$899,755$1,161,755$1,395,779$1,651,399$1,977,205
Additional Policy Collateral Value$119,926$126,160$128,283$133,789$139,474

The Result

Since Jane was able to purchase a significant policy while paying only a fraction of the premiums, she is able to help her heirs cover the costs of the estate taxes while still contributing $1 million dollars to her charity.  She is able to retain significantly more liquidity that can be used for other investments, assets, and living expenses.  As the policy was placed into an ILIT, the value of her taxable estate was not compromised by the policy itself, and the intent of the benefits is protected as well.    

The Service

Premium financed life insurance solutions require expertise and knowledgeable guidance to structure and maintain.  At Insurative, we work with clients to understand their financial goals and create policies and loan arrangements that benefit their overall strategy.  It is a complex process that requires diligence and experience in crafting a premium financed solution.  Insurative invites clients and their advisors to inquire about our offered premium financed loans, life insurance policies, the necessary requirements, and the process to get started.

pic of a piggy bank representing liquidity saved with premium financing

The Benefits and Criteria for Premium Financed Life Insurance

Premium financed life insurance has seen increased interest over the past several years in large part because it offers high net worth individuals flexibility in how their capital is deployed.  Individual coverage benefits from using premium financing to secure large life insurance policies run the gamut from estate tax relief to tax-free death benefit capital for heirs and beneficiaries.  

There are many uses for premium financed life insurance and for the right individual, it can be a game-changer when it comes to obtaining large and often expensive life insurance policies.

Premium financed life insurance for individuals can protect liquidity

One of the most obvious benefits of premium financed life insurance centers around the retention of liquid capital.  For very large life insurance policies, premiums can be quite costly.  Keeping a policy in force for the duration of an individual’s life can drain precious capital in premiums.  This is where premium financing can be of the greatest use.  

How it works

An individual with a net worth of at least $5 million dollars requires a large life insurance policy to protect their assets and assist their heirs.  Instead of purchasing a large policy and paying the high premiums, the individual works with an advisor to obtain a policy, and then procures a loan through a premium financing company from a lender to pay the premiums.  In return, the individual may pay the interest or a portion of the premium on the loan.  

Liquidity is the key

This is where liquidity comes into play.  The loan interest is often substantially less than the price of the premium.  Through the use of premium financing, the individual is able to obtain an expensive life insurance policy and maintain the integrity of the policy by choosing to possibly pay the interest on the loan.  This means that the individual can spend the money that would have gone towards the premium payments on more rewarding investments and life needs.  

When the individual passes away, if the loan has not been repaid already, the death benefit from the policy will cover the balance of the loan.  The remainder of the death benefit will pass on to the beneficiaries of the policy. 

scrabble letters of the word 'trust'

Trust owned, premium financed life insurance for large estates can hedge against the Estate Tax

One of the more common uses of premium financed life insurance involves estate planning.  In the United States, large estates are taxed upon the death of the estate holder.  This tax is passed on to the heirs of the estate.  It is not unusual for the heirs to be forced to liquidate assets in the estate in order to pay the estate tax.  

Premium financed life insurance allows the individual to purchase a large enough policy that bestows a significant, tax-free death benefit to the heirs that will help them cover the cost of the estate tax.  Life insurance policies that are placed into a family trust are valuable in that the policy should not count towards the value of the estate itself.  

Working with a skilled estate planner and a reputable premium finance company can ensure that a person’s heirs are not burdened with steep taxes when their loved one passes away.

Are there any limitations on premium financed life insurance policies?

Premium financed life insurance is not suitable for everyone.  In fact, in order to be eligible for premium financing, one should have a net worth of approximately $5 million dollars and may also require significant assets in order to collateralize the lender’s loan 

If a person is not in perfect health, they may still be able to leverage their premium financing and obtain a life insurance policy.  In many cases, the ability to finance the higher premiums associated with a person in less than perfect health can help offset the risk to the capital they would otherwise be burdened with. 

Each loan has individual terms and conditions that apply.

two hands shaking

Insurative is committed to helping clients find the perfect solution for their needs

Insurative has helped countless clients obtain significant life insurance coverage to protect their financial legacy for their families and loved ones.  Our team works with estate planners, lenders, and life insurance experts to facilitate and administer premium financed life insurance policies crafted specifically for each client and their unique needs.  Reach out to a team member to learn more about our process.   

premium financing for businesses picture of a man walking up a staircase of words

Premium Financing as a Tool for Business Liquidity

For more information contact Insurative Risk Solutions US, Inc. at 877-281-1311

Many business owners have had encountered enormous challenges over the past few years.  Reeling from pandemic-induced lockdowns, the subsequent labor shortage, and inflationary pressures, the day-to-day struggles of preserving enough liquidity to keep the business running have been seriously compromised.  At the same time, procuring and retaining top talent has meant offering stability, meaningful benefits packages, and competitive salaries.  Now more than ever business owners must find creative solutions to keep the lights on and the cash flowing.  For the right situation, premium financing can offer a way to preserve cash flow while protecting company assets.

Premium financing in a nutshell

To understand premium financing, let’s break it down by the words themselves.  

Premium 

Premium refers to the money spent to keep a life insurance policy active.  This can be paid monthly, in a lump sum, or other scheduled payment arrangement.  In return for paying the premium, the life insurance policy remains active for the business or individual.

Finance

Finance refers to the financing acquired to pay the premium in the form of a loan to the business or individual.  

With premium financing, a business purchases a life insurance policy through a life insurance carrier and obtains a loan from a lender in order to pay the premiums on the policy.  In order to secure the loan, collateral is required.  In some cases, the cash value of the life insurance policy can partially collateralize the premium loan.  As with most loans, the lender charges interest.  With premium financing, a borrower may be responsible for paying this interest to the lender.  The loan will be repaid to the lender on terms agreed to by the business or from the cash benefit of the insurance policy itself.  

a flower growing out of a stone in reference to premium financing helping save capital for businesses

Premium financing can free up cash for other business needs

For any business, the cost of life insurance can result in the loss of available cash to fund other investments and services.  Liquidating assets to pay life insurance premiums may put the business at a financial disadvantage when their cash is leveraged elsewhere in the company.  This is the sweet spot for premium financing.  

The company can keep more of its money in the business to make payroll, expand services, invest in infrastructure, etc.  At the same time, the policies themselves protect the business and its employees from the impact of future harm.  

Today’s benefits are tomorrow’s stability

In order to recruit and retain top talent in a business today, benefits packages have become nearly as important as competitive wages.  Offering comprehensive life insurance policies to key employees can create a serious cash flow burden on a company of any size.  Premium financing may solve the cash flow problem while still offering attractive benefits to keep these valuable employees in-house and less likely to move to a competitor.  

A business is only as strong as its team.  The high costs of turnover are well documented in every industry.  Premium financing allows businesses a way to compensate employees so that they stay while reducing the immediate expenses of offering benefits suited to their needs.

picture of a person climbing up a cliff in reference to premium finance companies helping business overcome obstacles

Premium financing requires diligent fiduciary-minded partners

There are many factors that can determine whether or not premium financing is right for any individual business.  It is important to lean on the expertise of financial business planners in order to understand whether it is the right move economically.  The team of experts at Insurative is here to help business owners understand the impact that premium financing can have on their bottom line.  

As the world comes out of these challenging times, premium financing may be more relevant to maintaining the financial and competitive integrity of businesses that suffered hardships over the past several years.  Insurative is here to help businesses with those hardships and offer cashflow-positive solutions for their recovery.  

For more information contact us at 877-281-1311 or visit our website at insurativeus.com.

two hands holding a small plant representing using premium finance and life insurance to support charities

Season of Gratitude: Using Premium Financing to Enhance Charitable Giving

As winter approaches, colder weather and festive holiday celebrations bring people together.  The season itself invites a spirit of philanthropy; a spirit of giving and gratitude.  It is also a season marked for charitable fundraising as non-profit and philanthropic organizations around the country reach out to their network for continued support.  Passionate donors are sometimes limited in their ability to provide the kind of future financial stability for the causes and institutions they champion.  One possible solution could be to leverage premium financing in order to secure a financial benefit for a charity from a life insurance policy on the donor.  In this way, a person could use premium financing to enhance their charitable gift while retaining their liquidity.

Picture of a sign that reads 'make the world better' referring to using premium financing to help charities

Life Insurance as a legacy for charitable causes

Purchasing a life insurance policy and naming a specific charitable organization as the main beneficiary of the death benefit is a concept that has been around for years.  When the policyholder passes away, the charity or organization receives the death benefit to fund its activities.  It is a way for donors to continue supporting their interests beyond their lifetime.  

One consideration when utilizing life insurance to support charitable giving is the impact that premiums may have on the donor’s liquid assets.  Large insurance policies require significant funding that could threaten to drain cash that could yield a higher return on value if invested in the market.  The donor would need to consider the value of purchasing a life insurance policy versus simply investing the money into their existing portfolio.  This is where premium financing can make the difference.

Premium financing covers the cost of premiums and frees up cash-on-hand

Premium financing allows the donor the ability to use a lending institution to loan the total premium cost of the life insurance policy to the policyholder, requiring less money upfront.  The policyholder offers collateral to secure the loan and the life insurance policy is kept in force through the premium payments to the insurer.  

The result?  The policyholder is able to keep their liquid assets intact while securing a life insurance policy that ultimately benefits their chosen charity or organization.  Upon the death of the policyholder, the lender has recouped the balance of their loan plus interest and the remainder of the death benefit is given to the charity.  

picture of snowflakes representing the season of charitable giving with life insurance

Premium financing opens many opportunities for those who want life insurance and financial flexibility

Premium finance as a tool to maintain financial flexibility while enjoying the peace of mind and benefits of owning a life insurance policy can be a perfect fit for high net worth individuals looking to leave their loved ones or their beloved philanthropic ventures in sound financial standing after they are gone.  

As the season of giving and gratitude approaches, let us know how we can help structure a policy to support charitable organizations through premium financed life insurance.  Season’s greetings!

*Independent legal and tax advice should be sought before implementing any strategies or programs.
Protect Your Liquidity with Premium Finance

Premium Financing: Protecting Liquidity

Let’s talk about premium finance.  People work hard to provide the best life possible for their family and loved ones.  The ability over the years to take intelligent risks, apply wise investment strategies, and work long hours has resulted in careers to be proud of and net worth’s that need to be protected.  It’s well known that life insurance is a sound component of any estate planning strategy and that a policy should be reflective of financial success.  However, the premiums on such a policy could severely limit liquidity and the capacity to keep the assets working. Fortunately, there is a solution, premium financing can be used as a tool to protect liquidity, allow assets to continue to work, and protect financial legacy.

Premium Financing 101: Setting Up Painless Premiums

Annual Premiums on large life insurance policies can be in the hundreds of thousands or more and they represent significant capital that could otherwise be invested in the market and other assets.  With premium financing, a third-party lender (commonly a bank) pays the policy premium leaving the borrower responsible for paying the interest on the loan.  This frees up significant capital and allows the borrower to protect their liquidity.  Policy beneficiaries receive what is left of the policy benefit after the loan has been repaid. 

Retaining Capital: Go With the Flowchart

Breaking down the diagram above, the borrower can see that through premium financing, they can retain more of their capital and assets while their beneficiaries will receive the death benefit.  This is made possible by a loan from the lender to pay the policy premium while the borrower may elect to pay interest on the loan or defer interest, these options can be decided upon on an annual basis.  Obviously, premium financing is not designed for everyone.  There are many requirements that must be met to secure premium financing in order to satisfy both the insurance company and Lender requirements.

How We May Assist in Protecting Liquidity?

If a borrower needs to learn more about premium financing, contact us.  IPFM is a premier premium finance company.  The Insurative companies have over 15 years of experience in the industry and have risen to provide the best boutique loans and services available without rival.  We will customize loan designs so that estate liquidity can be maintained and enhance the financial legacy left to heirs. 

We look forward to working with you.