Life insurance is necessary for many reasons, but to continue to carry coverage, you have to pay for it. Still, for some people premiums can be very high. The premium on your plan will be determined by many risk factors, and the higher the risk you pose to your insurer, the more you are likely to pay.
Still, high premiums shouldn’t discourage your ability to get the benefits you truly need, particularly if you have a high net worth that you need to keep secure. Qualifying individuals will find the solution to making a high premium affordable by choosing to finance their premium. Here’s how it works.
What is Premium Financing?
If you have a high net worth, then you are going to need a high amount of life insurance. And due to the high cost of this life insurance, your policy’s premiums are likely to be significant. Therefore, you might run into a scenario where you are diminishing your own capital just to continue to afford life insurance.
This scenario puts you at risk of significant asset loss and tax liabilities. To eliminate the risk, premium financing will enable you to both protect your capital while still paying the necessary proceeds to your insurer.
You can usually finance almost any type of life insurance policy, be it term life, whole life, universal and so on. As you begin the process of enrolling in your policy, you will indicate to your insurer that you want to finance your premium. Upon approval, you can apply for the loan through a financial institution.
Upon approval of the loan, the loan’s funding will be used to pay the premium off. The lender then bills the policyholder for the cost of the loan. Some people prefer to pay off the value of a loan in installments over time. Others, however, can arrange for the loan to be repaid following their death, out of their death benefit settlement.
Premium financing is often very popular among individuals with a net worth of more than $5 million, and it’s a step that is usually taken when interest rates are low. However, no matter what age you are, this is a great option to consider investing in for your life insurance future.
All in all, financing a life insurance premium will require careful attention to detail from you, your insurer and your bank. You will have to make several important decisions regarding your net worth, tax liabilities and overall goals for your life insurance coverage. However, with the help of your dedicated agent at ESG Insurance Solutions LLC, you will be able to find the perfect solution for your financial future.