Friday, April 26, 2013
Premium Finance
Premium Finance
Traditional premium finance has long been used by corporations and business owners to assist with cash flow in the payment of large business insurance premiums. In simple terms, the insurance company will give a discount for paying the annual premium, for example 10%, the business may not want to front that much out of current cash flow, and will therefore obtain a short term loan from a finance company, at perhaps 5% interest. The net result is that the business still saves on the insurance premium, and maintains liquidity of assets along with a manageable payment.
The same principle has been applied to premium payments for large life insurance policies. Hypothetically a $10,000,000 death benefit on an older individual may be $200,000 per year in premium. Instead of paying that out-of-pocket, a financial institution will pay the premium, and the insured will pay interest payments. The net result is that large life insurance policies can be funded with leveraged dollars, freeing up capital for other needs, or in the case of illiquid assets, allowing those assets to remain positioned as they were.
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Lance Wallach did not author this sales pitch. Put his name into the net. Then I suggest that you put the person trying to sell you into the net. Who do you believe???
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