Premium financing enables wealthy individuals with insurance needs to defer using their assets to fund a life policy. Clients can borrow the funds to pay premiums, thus leveraging and retaining their existing capital.
3 Mark offers a full range of premium finance services including underwriting expertise, case design and management, multiple funding sources, and marketing support. In addition, our strong relationships with our life insurance carriers allow us to leverage their considerable resources and knowledge base, such as tax and estate planning attorneys, CPA's and other subject matter experts.
Given the complex and time-consuming nature of the cases involved in premium finance, it is critical to align yourself with an organization that has the necessary knowledge, expertise and resources to place these cases.
There are two general types of premium financing arrangements:
- Traditional premium financing—The client fully collateralizes the loan, typically by posting cash, marketable securities, letters of credit, or life insurance policy cash values as collateral.
- Hybrid premium financing — The client only partially collateralizes the loan or uses alternative forms of collateral, such as a personal guarantee.
BENEFITS OF PREMIUM FINANCING
- Greater leverage of existing assets by keeping them invested rather than liquidating them to pay premiums
- Reduced cash outlay in early years
- Potential gift tax savings when the policy is owned by an irrevocable life insurance trust
- Potential to purchase permanent rather than term insurance
PROSPECTS FOR PREMIUM FINANCING
- Have a legitimate need for life insurance
- Have a net worth of $5,000,000 or more
- Have a need for financed premium greater than $100,000 per year
- Understand the benefits of leveraging borrowed funds over liquidating their own assets
- Meet life insurance policy underwriting guidelines
HOW PREMIUM FINANCING WORKS
2nd Vice President – Marketing