For many years Premium Financing was used by the Property & Casualty industry to allow employers to finance hefty commercial liability premiums. Fast forward to the last two decades and Premium Financing has evolved to fund a client’s large life insurance needs.
Premium Financing refers to the funding of premiums through a third-party lender, like a bank.
Clients who need a large life insurance policy to create liquidity for estate planning, wealth transfer or business succession may consider establishing a loan for the annual premiums through a commercial lender. This type of loan is similar to other loans: the arrangement requires approvals from both the bank and the insurance company issuing the policy, a fair market rate of interest is charged, and collateral in the form of the life insurance policy and additional personal assets must be posted.