High-premium cases can be difficult to close, especially when a client must liquidate other holdings to pay the six or seven-figure premium. In these instances, premium financing can be one of your most important sales tools. If you’re thinking about adding premium financing as an option for your clients, here’s a step-by-step guide that will help in closing those high-premium life cases.
Step 1: Partner with the client’s other advisors. When you present a high-premium life insurance policy to a client, you want it to pack a powerful planning punch. Design the policy with input from the client’s tax, finance and estate advisors to ensure that all of the client’s needs will be fully satisfied upon policy issue. This will also help with closing since those professionals have no financial interest in the sale of the policy.
Step 2: Overcome any premium objections by introducing premium financing. Your client may know that the policy is the right step for them, but the thought of freeing up the capital required to pay the premium could be a huge point of objection. That’s why introducing premium financing is a good idea. Use an illustration tool to show the difference between paying premiums out of pocket and using a premium financing approach. You can even take a hybrid approach and show the premium only partially funded through premium financing. This will also help the client fully understand their collateral requirements throughout the term of the loan as well as their loan balance accrual.
Step 3: Discuss premium financing in depth. You’ll want the client to understand how the interest works (whether it’s fixed or variable, for interest), the annual renewal (many lenders require an annual requalification) and collateral requirements, how policy performance will affect the collateral and how it may or may not offset the interest.
Step 4: Create an exit plan. Premium financing isn’t an indefinite solution. Your client needs to decide on an exit plan and create a strategy to achieve it. They may decide to exit using accrued cash values, exit with a trust or with outside funding. Whichever option they (and their advisors) decide on, make sure there’s a plan in place to implement it.
Step 5: Create a plan for future collateral requirements. Depending on how you structure the policy, the speed at which the cash values grow, and the performance of the policy, your client may need to have others sources of collateral ready. If the client is highly leveraged you may need to work with their financial advisor in order to determine suitable assets for collateral.
Step 6: Coordinate with the insurer. Both high-premium policies and premium-financed cases may have special requirements needed by the insurer. Talk to the insurance company in advance to find out what the underwriting requirements are and what you need for smooth processing of a premium financed case.
It takes a certain amount of client education and a refined process to integrate premium financing into your sales toolbox, but once you do it can open up a whole new business segment while providing your clients with a viable solution to their business succession and estate planning concerns.
Global Financial Distributors is the nation’s leading provider of high-touch, customized life insurance premium financing solutions for business owners and trust borrowers. Offering unparalleled case design expertise, highly competitive rates, no annual “re-underwriting”, rapid case closing, and flexible and responsive ongoing loan support and servicing, GFD is the best choice to meet your client’s premium financing needs. Call 800-515-2599 today to speak with a GFD financial services manager (FSM) to learn more.