Premium Finance
Preserve and Grow Your Wealth Wisely
Premium Finance can be an alternative method of funding life insurance premiums from a commercial lender as opposed to paying them out of pocket.
Premium Finance with
Life Insurance May Provide:
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An income tax-free death benefit
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Tax-deferred cash value growth
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Tax-free access to cash value
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Creditor protection, depending on ownership and state of issue
What are the Benefits?
Paying loan interest and pledging collateral instead of paying premiums may help:
Reduce the cost of the strategy
Increase the rate of return on cash value accumulation and/or the death benefit
Preserve and grow wealth that has been retained instead of liquidated to pay life insurance premiums
Interest rate risk
If borrowing costs rise to a greater extent than originally projected, it could result in more out-of-pocket costs or collateral.
Performance risk
The policy’s cash value can fluctuate and may be less than projected. This can result in more collateral required, less net death benefit, and potentially a shortfall in cash value to repay the loan.
Exit strategy risk
A plan should be in place to repay the loan, which can be done via a loan or withdrawal from the policy’s cash value, using cash flow from retained assets, using the proceeds of a liquidity event, and/or some combination.
Collateral risk
The lender will evaluate the collateral pledged and depending on the asset(s) pledged (i.e. cash, marketable securities, other cash values), these assets may increase or decrease causing more collateral to be pledged.