What is Premium Financing?
Premium financing is the lending of funds to high net-worth individuals to acquire large life insurance policies as a unique asset. It is a time tested strategy utilized by high net-worth families and business owners to create a tax-free asset that can be used for both tax-free lifestyle income and for leaving a tax-free legacy to heirs.
As one’s wealth grows, so does the need for life insurance, but seldom do high net-worth individuals want to interrupt their high-earning investments or disrupt cash flow to fund policy premiums. Premium financing allows those who qualify to purchase large life insurance policies with minimal out of pocket expense, leaving current high-earning investments undisturbed. This solution provides the individual with a tax-free asset and an attractive tax-free rate of return.
Top Reasons to Finance Premiums
Leverage – Most self-made millionaires are comfortable with the concept of leveraging their assets, and have used it to create their personal wealth. Premium Financing permits clients to leverage existing current assets and the policy’s cash surrender value to create tax-free wealth.
Retained Capital – Many high net-worth individuals current investments earn double digit returns. Premium financing allows them to keep their capital invested and working for them.
Increased IRR – Utilizing premium financing reduces the individuals out of pocket outlay, increasing the long-term internal rate of return.
Tax Savings – Maximizing potential tax advantages by providing tax-free lifestyle income and a tax-free legacy to heirs.
Who is it for?
Premium Financing requires a minimum net-worth of $5 million to qualify. The ideal candidate for premium financing is between the ages of 30 and 60, is in good health, is comfortable with the concept of leverage and desires to enhance their lifestyle and legacy planning.