Premium Finance

A loan can help high-net-worth individuals and businesses get the life insurance coverage they need or want without missing out on other investment opportunities. Due to the minimal initial cash flow outlays and with interest rates hovering at all-time lows,  premium financing your life insurance may make more sense than ever.

Leverage Your Assets

High-net worth individuals and families typically use life insurance in the millions and tens of millions of dollars to protect business assets, hedge tax issues, and create future liquidity.

If you do not wish to liquidate assets to pay for costly life insurance premiums upfront, you should consider a premium finance program.

The concept is simple: You take out a third-party loan to pay for the policy’s premiums. The lender charges interest; you repay the loan in regular installments until the balance is paid or you pass away, at which time the insurance proceeds pays the balance.

Of the many reasons to consider premium finance include:

  • Obtain large amounts of life insurance with a minimal upfront expense
  • Retain your capital; pay only loan interest vs. actual premiums
  • Avoid triggering capital gains tax
  • Keep your money working in higher-returning assets classes
  • Minimize gift and estate taxes by structuring policy ownership properly
  • Use more of annual gifting exclusions; don’t tap prematurely into lifetime exemptions
  • Increase long-term Internal Rate of Return by reducing outlay in early years
  • Create a large insurance based asset class which may ultimately return between 8%-10% tax-free to heirs based on life expectancy

  • Control Upfront Cash Flow

  • Maintain Estate Liquidity

  • Increase Cash Flow

  • Create An Additional Tax Free Asset Class

A typical client, age 70 (non-smoker), with a total Death Benefit of $10,000,000 (Level or Decreasing) and a Loan Interest Rate of Libor Treasury + 1.5% may acheive a savings of over $2.5 million.

 

Without obligation, let us show you how a custom designed premium finance strategy will work specifically for you.
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Advisors Insurance Design is an affiliated firm of The A.I.D. Group, a leading full-service financial planning firm headquartered in Fort Lauderdale, FL.

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