What is Premium Financing?

Premium financing can be a valuable tool for high-net-worth individuals who need life insurance but don’t want to tie up capital. The idea is that the return on these investments will exceed the cost to borrow.

These are high-net-worth individuals, corporations, trusts and partnerships needing substantial coverage who are looking for ways to protect, build, and transfer wealth in the most cost-efficient manner. If your clients are business owners, their net worth may not be liquid. Or, your clients may not want to liquidate growing assets to pay premiums.

Life insurance premium financing involves taking out a third-party loan to pay for a policy’s premiums. As with other loans, the lender charges interest, and the borrower (the insured, in this case) repays the loan in regular installments until the debt is satisfied or the insured passes away, in which case the balance is typically paid off with insurance proceeds.