Premium Financing
Premium financing is an alternative method for paying life insurance premiums. The idea behind premium financing is that a wealthy client has a present need for life insurance protection. Moreover, the client also has sound financial reasons not to liquidate high performing or illiquid investments.
Premium financing may offer high-net-worth individuals the ability to borrow the premiums to pay for an insurance policy, allowing them the use of funds they might have otherwise been used to pay for the insurance. The goal of a well-structured premium financing program is to have the individual pay as little out-of-pocket as possible for life insurance, balanced against the risk that the interest rate of the loan will exceed the performance of the policy. Premium loans can be repaid in three main ways: 1) during life, from the borrower's available assets, 2) during life, from policy cash values or other assets, and 3) at death, from policy proceeds. It should be noted that poor policy performance could result in a need for additional collateral to secure the loan.
Premium financing enables individuals with a high net worth to purchase life insurance without depleting other assets or changing their normal cash flow. They are able to help protect net worth, continue business development, and pass their financial legacy to future generations without altering other financial objectives.
At taxstrategy.com, we only use carrier approved premium financing programs that assist as a planning tool in the advanced estate and business planning marketplace. Well designed and properly administered premium finance programs can and do meet the personal, financial and estate planning needs of qualified clients.
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