PREMIUM
FINANCING
Premium financing is a current marketing concept that is being
used by many wealthy individuals requiring considerable life insurance coverage
for business planning. Premium financing is a method that funds the purchase
of life insurance for an individual who has significant assets, however, either
does not have, or does not wish to use liquid capital to pay the premium on a
life insurance policy. The individual borrows money to pay the life insurance
premiums, and since he has more available capital, as he is not paying the life
insurance premiums, he frees up business or personal investment capital that
can now be used more effectively for other uses.
Commonly, prospects for premium financing represent a minimum net worth of
at least $5,000,000. Assets are pledged as a collateral usually consist
of personal assets, and can be offset by the cash value in the policy being
financed. Often, the entity borrowing the capital must a partnership,
corporation, or trust. Premium financing programs are jointly developed
between lenders providing the financing and insurance carriers providing the
coverage. At the time of death, a portion of the death benefit is used
to pay off the loan to the lender. The loan can be paid off earlier if
desired.
Premium financing has many benefits. The use of financing for premium
payment lowers out-of-pocket costs and potential gift taxes, thus freeing up
business or personal investment capital so that it can be put to more efficient
use. In addition, premium financing can provide a substantially greater
internal rate of return on life insurance policy death benefit paid over non-financed
methods. Call JEFF Group today to help you with all your premium
financing needs. |
