Premium
Financing For Life Insurance
What is premium financing
for life insurance?
Premium financing for
life insurance is a method to increase your insurance needs by financing the
premiums. This enables individuals, businesses and large companies to purchase
insurance without having to sell off or tie up assets.
How does this work?
If you have a life
insurance policy, you pay premiums on a policy that is worth X amount of
dollars. Premium financing lets you use the value of your policy as
collateral for financing other insurance. This increases the range of life
insurance options open to you.
Is this sort of financing
cost effective?
Yes, your financing
options will be quite favorable because you can secure your loan amount against
the existing life insurance policy. You are going to get a much better rate of
interest and loan term with secured financing vs. unsecured financing. However,
your own personal financial situation needs to be looked at carefully and you
should definitely get advice before selecting the premium finance option.
Will I have to purchase a
new life insurance policy?
When premium financing
first came out this was generally true. It was a method to purchase a greater
amount of life cover, which has its advantages. Companies now are changing.
Some will let you finance based upon your current policy. This again will give
you much better financing options without having to put valued possessions up
for collateral.
Who else can benefit from
premium financing?
Wealthy investors and or
business owner quite often take advantage of premium financing for life
insurance. It works the same way for them except with a much larger amount.
Companies that don’t want to sell or tie up assets to purchase life insurance
policies can use premium financing. Quite often they want to purchase a large
amount of life insurance. Possibly to offer as part of an employees wages and
benefits. Premium financing enables them to do this which works to attract new
employees and /or keep highly valued ones.
Are there any other uses
for premium financing?
Yes, some use it for
estate planning, company expansion and protection as well as the above
mentioned attraction and retention of employees.
Premium financing exists
to enable people to purchase more life insurance as well as raise funds off of
an existing policy. Wealthy investors and individuals can both benefit from
premium financing. Whether you’re a company owner wanting to attract the best
and the brightest and keep your most valued, or an individual looking to expand
your life coverage options, premium financing may be a way to realize your
financial goals.