Premium Finance

Premium Finance Planning | Cornerstone Advisor Group VA

What is Premium Finance?

Premium finance is a strategy used by wealthy individuals and business owners to finance premiums for large life insurance policies. The strategy allows a high net-worth individual who has a need for permanent life insurance to use an alternative method for paying the premiums. Rather than using their current cash flow or assets to pay for those premiums, they may choose to finance them from a bank.

  • Why Choose Premium Finance: High net worth individuals and business owners likely have multiple options available for how they choose to fund their life insurance policy. While they should always be able to afford the recommended policy in the absence of financing, there are many reasons why they may choose to finance the premium, including: Planning around gift limits, Cash flow is tied up in business or other investments, Net worth is comprised of illiquid or emotionally significant assets.
     
  • Who is a Good Candidate for Premium Finance: Premium Finance is very attractive for healthy insureds between the age of 25-55, but arrangements can be successfully designed for clients up to insurance age 70. There are many options to consider when designing and implementing a financed life insurance policy, and we appreciate the opportunity to work with you to determine whether premium finance could be well suited to funding your life insurance policy.
     
  • Are there any Requirements for utilizing Premium Finance: Yes, we must take into consideration a client’s age, net worth, annual income, rate class, and income/savings or sources of collateral to support payments in the absence of financing depending on the plan.
     
  • Would you consider funding Foreign Nationals: Yes, as long as they qualify as a foreign national under our normal criteria and meet all premium financing client and design requirements. We will need to take into consideration the client’s global net worth and liquid assets in the United States (US). The policy must be owned by a US domiciled trust or business, financing must be through a US institution and all designs must show interest being paid.
     

  • Are there any Design Requirements: Yes, but since we review all policies on a case-by-case basis, it is best to schedule a meeting with one of our representatives who can assist you with an advanced planning strategy.

Using premium finance to pay for part or all of the premiums on a permanent life insurance policy may be an appropriate funding solution for high-net-worth individuals and businesses. A complete review of your situation – which includes understanding what you want to accomplish, the types of assets you own, your risk tolerance, and cash flow availability – is a critical next step in moving forward with a premium finance program.

Premium financing is offered and administered independently of the insurance company that issues the policy. The insurance company is bound only by the terms of the life insurance contract. Premium financing relies on internal policy funding to pay back the loan. This is not guaranteed, and results may be more or less favorable than illustrated. The ability to internally fund a life insurance contract will be dependent upon the performance of the contract and is not guaranteed. If remaining policy values and scheduled premiums are insufficient, additional out-of-pocket payments may be needed to keep the policy in force or to repay the loan.