Insurance Premium Financing is taking a loan from third party lenders to pay for life insurance policy premiums with a cash value that is meant to outperform the cost of borrowing. The policy holder can create enough surplus and benefit from this financing strategy if the premium financing is designed properly. It can be an effective solution to address wealth planning objectives, in terms of protection, liquidity, and accumulation. Borrowers can retain their assets, and lenders can acquire a long-term secure loan, while insurance carriers manage the life expectancy risk.
What Can Lions Financial Do for You?
Lions Financial helps during the premium financing of life insurance and advises clients on a suitable financing strategy. We work with clients each step of the way to ensure to get the best results. We pay attention to detail and to best assist, we applied a Four-step SIRE process to create value for you.
- Survey: We will begin process with a questionnaire to have a general understanding of your insurance need and identify the unique composition of optimal contracts. We clarify your objectives and gain understanding of the unique current issues that need to be addressed.
- Insight: To have a deep insight on your specific issue we will incorporate industry research and determine product offerings available from many sources. We will create an assessment and evaluation about your structural plan options available.
- Recommendation: Then, we will come up with solutions for an insurance premium financed program that is tailored to your requirements. As an independent firm we can present multiple providers to create a plan that helps create value in choices of companies available to you.
- Execution: We will implement the strategy you would like to execute on based on the options provided and budget available. We help achieve a better result with our professional experience, integration of technology, understanding of your needs, and staying attuned to the compliance and regulatory requirements.
The Key Items to Consider in Premium Financing
High Net Worth clients qualify to secure loans from third party lenders that can consider financing the premium of cash value life insurance.
This strategy works as following:
Instead of liquidating their assets to pay life insurance policy premiums, high-net worth clients can secure loans from a third-party lender to pay the premiums. This strategy works the interest on the loans is less than appreciation of the other assets being leveraged.
Loan interest is paid annually, and the loan principal can be repaid based on the terms of the contract up until the clients death. If there is a loan balance at the clients’ death, part of the life insurance death benefit would repay the loan and the remainder would go to the clients’ beneficiaries.
In the right circumstances, financing life insurance policy premiums may provide a client with a better internal rate of return than paying premiums out of pocket. This will vary greatly based on the clients’ loan terms, how the non-liquidated assets perform, and the point at which the loan is repaid.
- Target Clients
This financing strategy target with consumers with minimum net worth of 2 million dollars. Clients must have need for insurance but prefer to reduce the out-of-pocket cost and retain their assets to invest in other projects.
This is suitable for client with the following characteristics:
- Investors who need a substantial amount of insurance for estate-planning, wealth accumulation, asset protection or business purposes
- Do not want to use their existing capital to pay the premiums
- Is insurable at standard rates or better
- Satisfies the carrier’s underwriting regulations
- The Benefit of Premium Financing
Many clients tend to choose this arrangement, because of this valuable financial tool has several advantages:
- An opportunity for money saved by not paying the premiums to outperform the borrowing cost
- Given a set cash flow, an opportunity may exist to purchase more life insurance than if the client paid the premiums out of pocket
- Utilized for reducing or eliminating state taxes and leveraging generational gifting.
Contact Lions Financial to find a better strategy and holistic plan for you. Lions Financial help business executives, together with their tax and legal advisors, to develop the optimal financial solutions for success. Contact us for an initial consultation to help with your current business need.