Overview

Premium Finance enables high net-worth clients to purchase the life insurance they need without liquidating other investments or otherwise changing their normal cash flow. When properly structured, it may also help them transfer assets to children, grandchildren and charities with potentially reduced gift and estate-tax costs.

People usually don't object to owning life insurance; they just object to paying for it using current assets. This is true even for high net-worth individuals. In fact, these clients often face unique challenges in paying premiums. For example, gift and estate-laws can complicate a life insurance purchase. In addition, the policy often must be owned by a third party or outside entity that, by itself, may not have the means or the cash flow to make large premium payments.

Clients with these concerns may seek alternative arrangements that allow them to purchase the coverage they need with the potential for more tax favorable consequences, as well as not having major changes in their finances. They may be willing to pay a lending institution or employer to pay the premiums for them if it can be done on favorable financial terms. Premium financing may be the solution.