Life Insurance Premium Financing FAQ   

Life Insurance Finance
Frequently asked Questions and Answers

Q     What are some reasons I would want to have my premiums financed?
A     It will allow you to obtain a significant amount of life insurance with no out of pocket cost. It will allow you to hold on to your investments and not have to liquidate them to pay the premiums. It can help you avoid expensive estate tax and pass on more money to your family. It will provide millions of dollars to your loved ones at very minimal financial risk.

Q    What is the name of the bank that finances the loans?
A     For marketing reasons we are not placing the name of the actual bank on the site. However we will say that it is a publicly traded, state chartered bank and a member of the FDIC.

Q      Why doesn't everyone buy their policy with financing if it’s so good?
A      Not everyone can qualify for the financing program due to age, health and financial underwriting guidelines. However, premium financing is increasingly being recognized by all professional planners as a key tool in the estate planning arsenal.

Q     Why does the lender offer me such attractive terms while taking all the risk.
A    The lender understands that the policy is good collateral to the loan and is issued by a highly rated insurance carrier. Either the lender will be repaid with attractive interest, or will take over the policy and future premium obligations, upon default of the client. The lender has the right to settle the policy in the secondary market to recoup its capital in the policy or maintain it until maturity.

Q    Why hasn't my accountant or attorney ever heard of this program?
A    The notion of using insurance for estate planning liquidity is used as the cornerstone of most estate plans today. The idea of premium financing was a natural outgrowth that served the needs of wealthy, but illiquid clients, who also wished to accomplish estate planning goals. The unique low collateralized features of the company’s program are made possible by the lender being able to recover its exposure through either a life settlement of the policy or holding the policy until maturity.

Q     What are the financial risks in joining the program?
A     Financial risks in the program are very low. If a person goes through with the program until his death then all charges will be removed from the death benefit, with the remaining money and collaterals returned to your family. If you choose to quit the program at one point you may forfeit your policy to our financing company and walk away clean with no additional charges. There are only two minor risks involved, the first being in the case where the insured lives long enough for the interest to become larger then the death benefit. Such an occurrence is rare since it takes many years for that to happen. A second effect would be the usage of part of ones insurability line if he chooses to quit the program and forfeit the policy.

Q    If I die within the loan term, can the lender profit on my death?
A    No, the lender is only entitled to receive its interest in the policy which is equal to the premiums loaned plus accrued interest. Any excess over this amount is given directly to your beneficiaries.

Q    How old do you have to be to qualify for the program?
A     With the exceptions of rare cases most applicants are at least 65 or over.

Q     What is the minimum net worth required to qualify for the program?
A    Due to the large premiums involved the applicant must have a net worth of at least $4 million.

Q     In what state of health must the applicant be to get accepted to the program?
A    The applicant must be in general good health to qualify. There are always areas of flexibility, contact us for your specific situation.

Q     Do you finance premiums other then life insurance?
A     We focus specifically on life insurance premium financing. This allows us to offer very competitive loan terms with highly reduced collateral requirements.

Q     How much life insurance can be taken out through the program?
A     We generally finance the premiums on polices ranging from ?,000,000 - ?,000,000.

Q     What is the Minimum Premium Loan Requirement?
A     In order for an individual to take advantage of our Life Insurance Premium Financing Program he must be financing at least $????? in premiums.

Q     What type of collaterals do you accept?
A     We accept cash, securities, real estate (commercial or residential), or a letter of credit. Most competing companies will not accept real estate.

Q      What percent of the premium payments has to be backed up by collaterals?
A      While most companies will not approve the loan until 100% of the premium payments have been backed by collateral, we will go as low as 25% depending on the case.

Q    What is considered a sufficient collateral for the program?
A    In all cases, the bank will require the borrower to assign the policy as collateral and, if needed, will require additional collateral in the form of cash, cash equivalent, marketable securities, real estate or a letter of credit from a bank approved by the lender. When the life insurance policy cash value begins to exceed the loan balance, the bank may begin to release the additional collaterals. The insured will be responsible for maintaining adequate collateral throughout the life of the loan.

Q     Can I use the program to make money on a resale of my policy?
A      The program is designed only for clients with genuine estate planning needs, and is not designed or intended for the purposes of reselling the policy at a profit.

Q      If I do choose to resell my policy, can I sell it to whomever I wish?
A      Yes, as long as the client repays the loan and any interest due, the client can sell his policy to whomever he chooses, or maintain it until maturity and is under no obligation to sell to any one in particular.

Q     What will be the interest rate on the loan?
A     We have interest rates of PRIME+1 as opposed to most companies who have a higher rate of approximately LIBOR +2.

Q     For how many years must I take out the loan?
A     We give a five year loan term as opposed to other companies that sometimes make you take out a ten year loan.

Q     What are the loan terms for the program?
A     Loan terms fluctuate depending on the situation and the insurance carrier providing the life insurance policy. By submitting the quote form, you will be contacted by one of our knowledgeable representatives who will assess your exact case.

Q     What is the average length of the enrollment process?
A      Generally you should expect the underwriting process to take up to 8 weeks and allow additional time for your counsel to prepare the trust and review plan documents.

Q     How will the program help me with estate planning?
A     There will be no estate tax on the death benefits.

Q     Does the bank receive a share of the death benefits from the life insurance policy?
A     Unlike other premium finance companies that will take a large part of the death benefits, we do not participate in any benefits from the policy beyond repayment of the total loan due.

Q     How is the entire process regulated?
A     The bank is subject to FDIC oversight, which guarantees its stability.

Q    What plus do you have over hedge funds and private funding?
A    Many people do not like the idea of a privet institution owning a life insurance policy on their life. In addition such funding is unregulated and lacks the stability offered by a bank.

Q     What insurance carriers do you work with?
A      Nearly all allow premium financing in some form. We work with each carrier to create a unique set of loan terms which is both advantageous to the borrower and acceptable to the carrier.

Q    What papers and verifications are needed to join the program?
A   • Irrevocable life insurance trust (owns policy and designates beneficiaries on behalf of client)
     • Insurance policy
     • Policy release form
     • Collateral assignment of the life insurance policy (assigned to the lender to secure its interest in policy)
     • Non-recourse promissory note (signed by trustee of client trust)
     • Medical release form (to obtain medical records)

Q    When does the loan mature?
A     The premium finance loan matures upon the term date defined at the giving of the loan.

Q    Regarding future premium loans, must the borrower re-qualify each year?
A    No. The bank will provide a forward commitment on future premium loans, the borrower must only post an additional collateral if required.

Q    When is the interest on the loan payable?
A    Interest on the life insurance premium financing loan can be paid ?????????

Q    What is LIBOR and why don't you use that rate?
A    LIBOR stands for London Inter Bank Offered Rate. Although most of the times LIBOR has a lower rate than PRIME, most companies adjust it with a spread of 2 while we only adjust the PRIME rate with a spread of one, resulting with a lower rate for applicants.

Q     Does the Life Insurance Premium Finance Program require a Personal Guarantee on the loan?
A     No, unlike other companies we do not require a personal guarantee on the premium finance loan.

Q    Why Should I use PremFinance?
A     We have many advantages over competing companies, please see our comparison chart.

Q   What are the steps to complete the program?
A   • Complete an application for insurance with a licensed insurance representative.
     • Complete the necessary medical evaluation.
     • Create a new life insurance trust to be owner of the policy and designate beneficiaries.
     • If the policy is approved, it is issued in the name of the trust.
     • Complete loan documents with an attorney's review
     • The trust borrows from the finance company the premiums on the newly issued policy.
     • The finance company has no recourse to anyone but the policy which was given as collateral.
     • Enjoy your non recourse, no out of pocket, insurance plan.
     • Decide on the loan maturity if you wish to repay the lender or tender policy in exchange for a full satisfaction of the debt.

Q   Why is Life Insurance Premium Financing better then the self-financing approach?
A    Self financing often causes problems with estate taxes. With the death of the insured the loan to the trust that was set up becomes an asset of the taxable estate, and the principal balance at death will be subject to estate tax. As a result of this up to 50% of the death benefit may be lost to estate tax.

Q    Can I pay out of pocket instead of financing if I choose to?
A    Yes. A client can choose to pay out of pocket in any given year during the loan. Our bank will follow up with the carrier to make sure the payment was made as the policy is being held as collateral. Clients should know that if they decide to pay out of pocket but don’t end up paying the carrier, they can place themselves in a default situation.

Q    Can a non-US citizen participate in the program?
A     Yes, but the individual must have at least $4 million held in the United States.

Q    What protection is there against rising interest rates?
A     The bank offers the ability to obtain rate guarantees or “fixed” rates during a limited period of time as well as “interest rate caps” that limit cost exposure during interest rate increases above a pre-determined rate.

Q    Would you consider financing a deal involving a charity?
A     Yes, as long as they can meet the qualifications of the program.

Q. How do I proceed?
A. The first step is to fill out the quote form. You will then receive a call from one of our representatives who will assist you in completing the necessary application forms and answer all specific questions you have concerning the program.

Q    Who do I contact for more information?
A    Feel free to email us at: lifepremium@gmail.com with any questions or comments that you might have.

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If you have any questions about the program please feel free to email us.