Premium Financing - A Loan For Life (Insurance)

What is premium financing? Premium insurance financing enables high net worth individuals (HNWI) to obtain life insurance at minimal cost by arranging financing from a lender to cover the policy premiums. HNWIs are unlikely to want to liquidate assets to pay for such premiums and therefore opt for premium financing. The underlying need for the life insurance may vary, for instance, it may be due to estate planning purposes, a corporate buyout or the need for key person insurance.

The basics of premium financing are:

• a HNWI may settle an irrevocable life insurance trust (ILIT) or may utilise an investment holding company - to act as borrower, policy owner and policy beneficiary (Borrower);