Premium Financing Life Insurance is a powerful financial tool that has been used by the super rich for about two decades to protect and boost their wealth. Until recently, Premium Financing was only available to clients worth $10m or more. A number of years ago an innovative company made Premium Financing available to $150k+ earners with a trailblazing premium financing concept. The concept has been thoroughly stress tested and is structured to survive the worst stock market recessions including the Great Depression. While premium financing is more complicated than a standard IUL, the benefits are astounding.
There are two types of Premium Financing. The first is called Full Financing which is the traditional Premium Finance concept and is limited to clients with a net worth of $10m and above. Full Financing utilizes leverage from a third party bank at significantly lower interest rates than mortgage rates. The client needs to post collateral for the loan until the policy gains enough cash value to be used as collateral. The financing is used to pay the premiums for a max funded Indexed Universal Life policy which averages 7% a year and easily outpaces the interest on the loan. Clients generally use this strategy to fund large estate tax obligations to enable the successful transfer of the estate from generation A to generation B or as part of wealth management strategy.
The second type is called Partial Financing and is available to $150k+ earners. In a Partial Financing concept the client pays 25% to 40% of the annual premium and the third party bank loans the remaining premium balance. Partial Financing is usually structured in a group within a Premium Finance platform which enables numerous benefits over full financing- the interest rate is generally in the area of LIBOR + 1.75, the loan is not in the client’s name, and the cash value in the policy covers the collateral requirement for the bank loan. Once again the 7% average rate of return easily outpaces the interest on the loan. The growth on these policies are fantastic and our clients often use them to fund their retirement.
Contact us to schedule a no-obligation meeting or for more information. We guarantee you will not be disappointed!