Who Is a Candidate for Premium Finance?

Not everyone is a suitable candidate for premium finance. After the need for life insurance is established, premium financing might be considered as a method for funding the life contract. But only if the client has the following general characteristics:

  • Has more than $5 million of net worth or $300,000 of income
  • Needs life coverage for estate tax, estate equalization, liquidity, or for business needs such as stock redemption
  • Seeks a high return on assets
  • Wants to minimize gift tax exposure
  • Feels comfortable using leverage

Although financing offers considerable value, agents and advisors must be careful not to over-promise. The strategy needs to be presented realistically so clients are NOT under the impression that the don’t have to “pay for life insurance”.

With any policy involving premium finance, clients need a clear understanding of how their premium financing loan will be paid off. There needs to be an exit strategy that takes in to account all possibilities. Consistent monitoring of the strategy (ie: yearly reviews and projections) are key to the strategy and provide a strong structure on which to build the concept.

About Jeffrey Berson

40 years in and around the industry has made Insurance a part of my DNA. I have had the pleasure of working with and for some of the greatest minds in our industry. My "Bersonal" View is an attempt to capture some of the best ideas, the best concepts and the best practices in a way that can lead to success for others. It will certainly be my point of view, so please...don't take it "Bersonal".
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