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.
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.
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.
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.