Johnathan Sterling
Net Worth: $30M
Life Insurance Need: $10M
hover to reveal ›Suitability
Avoids liquidating investments, maintains current strategy.
Premium Financing
Overview
What Is Premium Financing?
Premium financing is a strategy where a third-party lender is used to help fund life insurance premiums, allowing qualified individuals to preserve liquidity while implementing broader financial strategies. This approach involves costs and risks and may not be suitable for everyone.
Why It Matters
Insurance Benefits
01
Enhanced Financial Flexibility
Premium financing allows you to pay for life insurance premiums over time, preserving your liquidity for other investments or expenses.
02
Leveraged Growth
By borrowing to pay premiums, you can potentially access a larger life insurance policy than you would with an upfront lump sum payment.
03
Tax Benefits
In certain cases, the interest on premium financing loans may be tax-deductible, providing potential tax advantages.
04
Asset Protection
Life insurance policies can offer a degree of asset protection, safeguarding your wealth and legacy for your beneficiaries.
05
Estate Planning
Premium financing can be a valuable tool for estate planning, helping you efficiently transfer wealth to the next generation.
06
Liquidity Preservation
For high-net-worth individuals and businesses, premium financing can help preserve liquidity and maintain flexibility for opportunities.
Case Studies
The Answer May Be Premium Financing!
Samantha Burns
Net Worth: $50M
Life Insurance Need: $15M
hover to reveal ›Suitability
Keeps business capital intact, no need to sell shares.
Elijah Green
Net Worth: $40M
Life Insurance Need: $20M
hover to reveal ›Suitability
Preserves estate structure, manages tax liabilities.
Angela Martinez
Net Worth: $25M
Life Insurance Need: $12M
hover to reveal ›Suitability
Keeps non-liquid assets, supports philanthropic goals.
Strategy
Make Your Life Insurance Work for You
Building a solid legacy involves more than just having a life insurance policy. However, paying for a policy can often tie up a significant amount of capital, leaving little room for other gifts you may be developing for the next generation, such as real estate or trust accounts.
At the end of the day, life insurance is primarily designed to protect your loved ones from the financial burden of taxes and fees that may accompany the transfer of your estate. Depending on the size of your estate, you may require a substantial amount of life insurance coverage to ease this transition. So, how do you finance such a policy without disrupting your other financial plans?
The Answer May Be Premium Financing!
Premium financing lets households and corporations buy substantial quantities of life insurance without paying the higher premiums upfront. We carefully create and manage premium financing strategies that can help safeguard and benefit our clients. Premium financing requires specific handling. WealthBridge understands the approach, how to execute it, and can help deliver real results.
Premium financing funds life insurance premiums with a loan from a reputable bank. Thus, the client temporarily reduces life insurance costs to loan interest rates. This reduces upfront costs and frees up resources to invest in other priorities. The strategy may provide tax-deferred accumulation inside the policy, which can enhance long-term value.
- Preferred treatment
- Tax-deferred growth of cash value
As you can see, premium financing is unusual—yet it might change your financial future.
Why premium financing?
Choosing premium financing for life insurance can be advantageous for those seeking to preserve liquidity, leverage assets for a larger policy, and potentially gain tax benefits. It is particularly useful for estate planning and business succession purposes.
Why should I consider providing premium finance to my clients?
Insurance agents should consider selling premium financing cases to their clients for several reasons, including the ability to meet diverse financial needs, enhance client loyalty, gain a competitive advantage, earn higher commissions, and create referral opportunities. Offering premium financing can also foster long-term relationships and professional growth, particularly when addressing complex financial goals.
What are the risks associated with premium financing?
Premium financing for life insurance carries risks including interest rate costs, investment volatility, potential policy lapses, and the use of assets as collateral. Rising interest rates, changing regulations, and the complexity of the strategy further add to the potential challenges.
What are the requirements for premium financing?
To qualify for premium finance life insurance, clients typically need a high net worth, insurable interest, and good health. They must also have a strong credit profile, a stable financial situation, and a clear understanding of premium financing.
Are the interest paid on the loan tax deductible?
Depending on how the premium financing arrangement is structured and the purpose of the life insurance, the interest paid on the loan might be tax-deductible. This can offset other taxable income, thus lowering your overall tax liability.
How do I select the right premium financing provider?
To select the right premium financing provider, start by evaluating your financial needs and seeking recommendations from trusted advisors. Research potential providers, considering factors such as reputation, licensing, financing terms, and customer service.
Click below to speak with a WealthBridge Premium Financing professional.
Premium financing strategy is used to purchase life insurance financed partially with borrowed premiums. It allows high net-worth individuals who need a large amount of life insurance to use an alternative method for paying premiums – rather than using your current cash flow or liquidating assets to pay premiums, you obtain the funds needed by borrowing from a third-party lender.
Premium financing relies on internal policy funding to pay back the loan. This is not guaranteed, and results may be more or less favorable than illustrated. The ability to internally fund a life insurance contract will be dependent upon the performance of the contract and is not guaranteed. If remaining policy values and scheduled premiums are insufficient, additional out-of-pocket payments may be needed to keep the policy in force or to repay the loan.
Premium financing is offered and administered independently of the companies of National Life Group. National Life is bound only by the terms of the life insurance contracts issued by the Group insurance companies. Guarantees are dependent upon the claims-paying ability of the issuing company. This business strategy is offered and managed by an independent third party who is not affiliated with Equity Services, Inc. (ESI) or its affiliates. Neither ESI, its affiliates, nor anyone acting on its behalf has evaluated the strategy or is authorized to make any representation regarding the suitability, effectiveness, or legality of this strategy, or the suitability of using life insurance in connection with this strategy.
The third-party lender is responsible for creating the premium financing arrangement. The life insurance companies with which we work are bound only by the terms of the life insurance policies that they issue.
As there are various risks associated with premium financing, careful consideration should be made to determine if this concept is suitable for you. These risks include, but are not limited to, interest rate risk, crediting risk, and collateral call risk.