Premium financing is an arrangement with a third-party lender to pay life insurance premiums.  Financing life insurance is a leveraging technique which allows individuals to purchase significant amounts of insurance for estate tax liquidity, business succession, or financial planning needs, without the necessity to liquidate assets which are currently positioned to maximize the client’s investment returns.


Greatly reduced out-of-pocket costs minimize cash flow impact required to purchase life insurance

Client maintains control of their capital, allowing continued growth of current assets at higher rates of return

Future value of a client’s life insurance policy is usually noted as an asset with a positive return on investment

Eligibility for Premium Financing
 
Because of it complexity, premium financing is not for everyone. If you have financially sophisticated clients with skilled tax and legal advisors, this strategy may be appropriate for them. Also, your clients must meet certain eligibility requirements. To qualify for a premium financing arrangement, clients should demonstrate the following;

    * A need for life insurance.
    * Have a minimum net worth of $5,000,000 ($10,000,000 preferable) or more.
    * Have verifiable annual income in of $200,000 or more.
    * Have liquid assets sufficient to pledge as collateral for the loan.
    * Meet life insurance policy underwriting guidelines.
    * Commit to at least $1,000,000 in loans to provide premium.

How Premium Financing Works
 
The premium finance concept is simple your client borrows money to pay life insurance premiums. The actual transaction itself can be quite complex. For that reason it is crucial to involve legal and tax advisors in the process.
 
While each premium finance transaction is unique, every transaction consists of two separate financial instruments; a permanent cash value life insurance policy, and a loan. The process occurs in two steps;

   1. The Life Insurance Policy

      The initial life insurance application process is similar to any other life insurance application. The life insurance company will complete medical and financial underwriting to determine if your client qualifies for coverage.


   2. The Loan Application

      After the policy is approved, a loan application is submitted to the lender for approval. The lender will review your client's credit and financial status and decide whether or not to make the premium loans.

      Once loan approval occurs your client's premium finance case is underway. The documents are then sent to your client's legal counsel to be executed, and the policy is funded.

Legal and Tax Considerations
 
Premium financing has tax implication in a number of areas including estate, gift, and income taxes. Your clients must rely on their own legal and tax advisors to review and explain the legal and tax issues for their specific case.


There are many different types of companies out there that provide premium financing. As long as you do your due diligence looking into different firms, you can rest assured that having a company finance your premiums will elevate you from having to fork out the hefty premium payments. This will leave your money in its current investments to accrue as you have intended.

Metropolitan Advisory Group is a leader in carrier compliant and insured friendly life insurance premium financing for high net worth senior’s ages 60 to 85 and in moderate to excellent health.  We provide innovative asset protection and estate planning tools to insurance brokers, lawyers, wealth managers and private individuals.  In addition we leverage relationships with funds and investment banks currently active in the premium financing marketplace.  MAG also offers life settlement transactions through their strong relationships with life settlement providers, brokers and direct buyers. 

Additional Benefits of Working with IAAG:
• Competitive Commissions
• Carrier Compliant Financing Program
• Expert Case Management & Design
• Complete Transparency
• Access to Your Case Status Online 24x7

For More Information contact:

Jonathan Mittman

Vice President

Metropolitan Advisory Group, LLC

212-332-7596

jmittman@metropolitanag.com