| Life insurance premium financing is used by wealthy | | | | Interest on the life insurance premium financing loan is |
| individuals to pay their life insurance premiums. By | | | | considered to be personal interest, and therefore, not |
| financing your premiums, it allows you to free up the | | | | tax deductible. |
| funds that might have otherwise been used to pay | | | | If you are considering a premium financing loan for |
| your premium. Many wealthy people require a | | | | estate planning, there are some tax issues you may |
| substantial amount of life insurance for business | | | | want to consider. The life insurance proceeds will be |
| planning, estate planning, or for income replacement. | | | | included in your estate if you own the policy. If the life |
| In order to qualify for life insurance premium financing | | | | insurance policy is owned by an irrevocable life |
| most insurance companies require you have a | | | | insurance trust, estate taxes on the death benefits |
| minimum of $2.5 million in net worth and at least a | | | | may be avoided. |
| $200,000.00 a year income. In addition, you must be | | | | Before you consider financing your life insurance |
| bankrupt remote entity, such as a Limited Liability | | | | premiums you should be aware that the life insurance |
| Corporation, or an Irrevocable Life Insurance Trust. | | | | policy will have to earn returns of between 150 to 300 |
| In a normal premium financing arrangement, you would | | | | basis points over the interest rate of the loan. |
| apply for a policy at the same time you apply for a | | | | In addition, you should ask what the loan commitment |
| loan. The loan is usually arranged by the insurance | | | | fee is, as well as knowing whether the life insurance |
| company you are working with although there are | | | | premium financing loan is renewable, how long the |
| many different companies that handle only the | | | | term of the loan is, and if the loan extends well beyond |
| financing and do not deal with the actual insurance | | | | your life expectancy. |
| policy. While you are being medically underwritten for | | | | You may want to find out if the loan requires a |
| the life insurance policy, your loan is being processed. | | | | personal guarantee, or if the loan is guaranteed by the |
| Assuming you pass the medical exam and qualify for | | | | life insurance policy. |
| the loan, the policy and financing are put into place at | | | | Also, you want to know how if the program is |
| the same time. | | | | designed on your IRS calculated life expectancy or is it |
| The benefits of a premium financing arrangement is | | | | conventional. If the loan is based on your life |
| that it frees up business and personal money to be | | | | expectancy, and you live beyond that, the loan amount |
| used more efficiently in other investment arenas. In | | | | will exceed the cash value and the whole program will |
| addition, life insurance premium financing may minimize | | | | come apart. |
| gift taxes, and can provide a greater rate of return on | | | | Before entering into a financing agreement you may |
| the death benefit paid through regular non-financed | | | | want to consult a trusted attorney, your financial |
| methods. | | | | advisor, and/or your Certified Public Accountant. |
| Life insurance premium financing loans may be repaid | | | | You will also want to shop around and compare |
| either by paying a monthly payment while you are | | | | insurance companies, their individual plans, the premium |
| alive, pay from the policy itself, or at the time of your | | | | amounts, and the different types and amount of life |
| death, proceeds from the policy will pay off the loan. | | | | insurance available to you. |