What Is Insurance Premium Financing?
A premium financing deal includes the loaning of money from a bank or hedge fund to pay the premiums of a newly stemmed insurance policy. Premium financing is available to elders age 65 and older. Most of financed policies have a face amount of over $1,000,000. The senior will obtain the cash for an established length of time ranging from 2 years to life. The exact same banks and hedge funds associated with life settlements are also the loan providers for premium financing deals.
Senior citizens who receive premium finance are usually in good health with a high net worth. Financing is a great monetary tool for elderly people who require the protection of an insurance plan for estate preparation or wealth transfer. It enables these health seniors to buy the policy at little to no expense expenses.
A lot of the funding options readily available today are approved by the insurance coverage carrier. These programs, called recourse financing, involves the customer putting up a letter of credit or other form of security to balance out the loan should there be a default. Non-recourse financing uses the policy as the only collateral requirement for the loan. Ought to the insured default on the loan the rights within the policy would go back to the lender. It needs to be kept in mind that there are no documented occurrences of a lending institution exercising the letter of credit or security in an option finance deal. The loan provider always takes over the policy as in a non-recourse program.
At the end of the loan term the insured can pay the overall loan quantity plus interest to the loan provider and keep the policy. If the protection is no longer required or desired the policy can be marketed and sold in the secondary insurance coverage market. The earnings from the same will be utilized to repay the lender with the remainder going to the insured. If the policy is no longer required or wanted and not commercial the policy will go back to the lending institution.
Premium funding is the fastest growing sector of the secondary insurance coverage market. Lots of baby boomers are asset rich and money poor with a need for the protection supplied by an insurance plan. All seniors who fit into this classification needs to contact their financial advisor or life settlement and premium finance broker to talk about the options offered to them.