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 owners 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.
Learn more about life insurance premiums and get a quote on low cost term insurance now.