When you’re a business owner or individual with a demonstrated life insurance need, generating the money needed to purchase the appropriate amount of coverage can sometimes be difficult. Financial resources, by their very nature, are finite, and even if premiums are reasonably priced, there’s only so much money that can go around when it’s tied up in other obligations.
“Premium financing can work for more people than you might think.”
That’s where life insurance premium financing can come in handy. Life insurance premium financing enables you to keep your capital where it already resides, while still taking advantage of the benefits of life insurance via the assistance of a third-party lender. This lender makes the funds available to the buyer, who eventually pays back the amount loaned with interest.
That’s a thumbnail sketch of life insurance premium financing, a strategy that has worked successfully for many people coming from a variety of backgrounds. During the course of that time, however, a number of mischaracterizations have come to the fore that are important to address to correct the record. Here are some of those misconceptions and why they’re off-base.
- Interest rates make life insurance premium financing a bad deal
You’d be hard-pressed to find a loan that doesn’t include some form of interest rate. Whether it’s to buy a car or mortgage a house, interest rates allow lenders to make money. What people often fail to realize about life insurance premium financing is they have more control over what they’re charged in interest than other loan products.
For example, not only can you choose between fixed or variable, but also the type of variable interest rate, such as prime or LIBOR. Additionally, if you’re a business owner, what you pay in interest may be tax deductible.
- You have to be extremely affluent for life insurance premium financing to make sense
Affluence is a relative term. The circumstances of the person often determines what kind of financial shape he or she is in, as a six-figure salary or more doesn’t buy what it used to with the rising cost of living or for parents with several young children to support.
Generally speaking, the ideal premium financing candidate is someone who earns $250,000 per year or more, with investable assets of at least $1 million. For small business owners, the optimal income is a $175,000 annual salary or higher with unencumbered assets equal to or greater than $1 million.
- Premium financing is geared toward retirees or those close to retirement
Life insurance seems to be something that many people start to think seriously about only when they get older, within 10 or so years of retiring.
Aside from the fact that more individuals are putting off retirement, life insurance is ideally purchased when you’re younger, when the typical person is healthier. This helps keep premiums affordable. And as it pertains to life insurance premium financing, the average business owner ranges between 45 and 60, well before senior citizenry.
There’s plenty more where these misconceptions came from. Here at Global Financial Distributors, we have the life insurance premium financing solutions that can fuel your coverage needs. We do it through our patented Leveraged Planning® solutions program. Finding out more by contacting us today.