Premium Financing

Premium Financing

The primary benefit of a life insurance premium financing strategy is to obtain a significant amount of life insurance coverage at a reduced cash flow cost, and virtually any cash value life insurance policy can be funded in this manner. The loan structure, loan interest, fees, collateral requirements, and personal guarantees associated with this technique will be determined by the lender.

Premium financing solves a longstanding problem for the high net worth individual. Premium financing addresses the need for estate or business planning without requiring the expenditure of dollars for premiums or out-of-pocket expenses for interest payments. In this way, the client's cash flow and/or investments need not be liquidated to fund the needed policy; the client's investment portfolio can continue to grow without interruption; and the client's estate is protected at death.

A secondary benefit of a premium financing strategy is the opportunity for interest rate arbitrage because the loan interest associated with premium financing may be lower than the policy's non-guaranteed internal rate of return.