Specialty Life Insurance Premium Financing
Plan your legacy to maximize the inheritance you leave to your heirs.
While a life insurance policy may provide the liquidity needed at the time of death, the insurance premiums during one’s lifetime can be very high, and may also be subject to gift taxes. We structure custom client financing solutions to reduce their annual out of pocket payments, resulting in the ability to acquire the needed coverage in a both an opportunity cost and tax-efficient manner. The loan is secured by the net cash surrender value of the life insurance policy and other liquid assets, often the assets in a client’s securities account creating yet an additional benefit—the client’s current portfolio allocation and long-term investment strategy can remain intact.
Southport Compass partners with advisors and works directly with clients to assess, present, analyze, design, and execute life insurance premium finance cases. We bring a unique and sound perspective to financing premiums with our planning process.
- Efficient Target Client Profiling
- Structuring Planning Arrangements
- Expertise in Transaction Execution
- Assessing Goals and Life Insurance Needs
- Established Direct Lender Relationships
- Carrier Alignment with Processes and Requirements
- Responsible Product Designs
- “Stress Testing” Transaction Protocol
- Annual Inforce Policy Management
FAQs
Is Premium Financing Possibly appropriate for me?
Net worth minimum $15,000,000
Needs life insurance, but is interested in evaluating premium funding alternatives
Has high-performing investments or business interests
Business owners, real estate developers, family offices and other individuals who understand leverage
Qualifies both medically and financially for a life insurance contract
What are the main reasons I should consider premium financing?
Reduce out-of-pocket payments for life insurance
- An attractive interest rate on borrowed funds results in reduced current net out-of-pocket cost for the life insurance coverage
Little or no impact on current investment portfolio
- Obtain needed coverage and maximize the time value benefits of your money without liquidating high-performing assets and paying income taxes
Potentially favorable gift tax results
- Grantor of the trust owning the life insurance policy will generally need to gift interest payments only, rather than the entire premium payment
What is the standard structure of the loan and exit strategy?
The most common approach involves borrowing at a loan interest rate that is currently lower than what is expected to be earned on investments or other assets. Lenders require collateral and it is generally made up of the life insurance cash surrender value plus a portion of other liquid assets, including marketable securities. At a time in the future, the loan principal is paid back with a planned loan exit strategy which may include payment from the policy cash surrender value. If death occurs earlier than planned loan repayment, the death benefit will satisfy the debt.