Life Insurance Premium Financing
Life insurance premium financing involves financing insurance premiums by lending funds to a premium financing company, an insurance company or a brokerage. These institutions present the individual with a premium finance agreement for a loan which can last for as little as one year or as long as the life of the loan. The loan covers life insurance premium payments and other bills and, upon the owner's death, pays out the life insurance policy to the deceased's beneficiaries.
There are two main types of life insurance premium financing options. The non-resource premium finance arrangement removes any liability from the insured party or their estate. The policy serves as the collateral and allows the lender to foreclose on the policy and collect the insured's death benefits in the event that the policy holder does not re-pay the loan at maturity.
The recourse premium finance relates to a policy holder who intends to hold onto the life insurance policy until the policy matures. This is often the life insurance premium financing of choice for individuals who have a net worth which is large but not liquid.
Benefits of financing an insurance premium include the ability to attach multiple insurance policies to a single premium finance plan, the agreement's transparency, the option for clients to obtain insurance without liquidating their other assets and the possibility of obtaining the insurance without making a large initial payment to the insurance company.