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Premium Financing
Premium Financing involves the lending of funds to a person or company to cover the cost of an insurance premium. Premium finance loans are often provided by third party finance entity known as a "Premium Financing Company"; however insurance companies and brokerages do provide premium financing services.
To finance a premium, the individual or company requesting insurance must sign a premium finance agreement with the premium finance company. This is a loan contract that lasts for the life of the insurance coverage. The premium finance company then pays the insurance premium and bills the individual or company, usually in monthly installments, for the cost of the loan.
Premium Financing lets clients with significant insurance needs finance payments with little or no out-of-pocket costs and without the need to liquidate high-yielding assets to make policy payments. They can do this by using a combination of their life insurance policies and other assets as collateral.
Benefits
There are a number of benefits to financing an insurance premium. These include:
- Eliminates the requirement for a large up-front payment to an insurance company.
- Multiple insurance policies can be attached to a single premium finance contract, allowing for a single payment plan to cover all insurance coverage.
- Premium financing is often transparent to the individual or company insured. Brokers transmit the completed premium finance agreement to the premium finance company, and the policy holder is billed as they would be for any other typical insurance policy.
Clients Who Might Benefit
Premium financing allows high net worth individuals to use a combination of the life insurance policy and other assets as collateral for a loan to fund life insurance policies.
- With large estates that wish to preserve as much of it as possible for future generations
- With significant insurance needs who desire to finance the payments with little or no out of pocket costs
- Reluctant to liquidate high yielding assets to make policy payments
- Uncertain of the current status of the Federal Estate Tax and wish to hedge their insurability
For more information about Premium Financing please call us at 1-800-879-9630
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