Understanding Life Insurance Premium Financing

Life insurance premium financing is a complex concept of life insurance formed to let affluent people acquire enormous amounts of policy while settling some of the costs of the policy at the same time. Premium financing will be possible if there will be collaboration of at least two financial institutions. The policy holder must be old enough for the premium financing agreement to be fit for this sort of arrangement. This arrangement usually requires that the individual should be older than age 70 but younger than age 84. In addition, the insured should be in good health to get a life insurance and must also have a net worth of at least $5 million.

The Loan

Premium financing entails pulling out a loan to obtain life insurance. These sorts of loans can be considered as special loans with small interest rates that are merely obtainable through premium financing. They can also be a non-recourse loans that are protected by the insurance policy itself. When we say non-recourse loan, it means that the loan is secured by the death benefit of the insurance policy. Even if the policy holder fails to make payments for the loan, the bank is assured to get its money back.

The Life Insurance Policy

An insurance policy is an element of a premium financing arrangement. The insurance policy acquired is typically utilized as a component of a charitable gift but can be employed for variety of purposes. The cash values of the policy are generally not accessible on hand to the policy holder since it is secured by the premium finance loan.

Advantages

The primary advantage of engaging in premium finance arrangement is that a wealthy individual can hand down millions of dollars to its beneficiaries while reducing the cost incurred from the premiums. On the contrary, the loan payments can be obtained from the interest of the present investments. Given that payments do not depend mainly on age or health and the loan is guarded by the insurance policy, the bank is able to charge minimal interest rates to make it become more affordable than premium payments would cost.

Other Concerns
When acquiring a premium financed life insurance policy you need to consider the fact that you are getting a loan to obtain an insurance policy. Always remember that even if you are not making premium payments, you should still make loan payments. Therefore, it is necessary that you can afford to pay your loans from the bank. Moreover, banks usually offer these types of loans to people with high net worth because they have the needed assets that are required to substantiate such large amount of loans and have collateral to protect the interest of the bank.

Life Insurance Premium Financing

Life insurance premium financing is used by wealthy individuals to pay their life insurance premiums. By financing your premiums, it allows you to free up the funds that might have otherwise been used to pay your premium. Many wealthy people require a substantial amount of life insurance for business planning, estate planning, or for income replacement.

In order to qualify for life insurance premium financing most insurance companies require you have a minimum of $2.5 million in net worth and at least a $200,000.00 a year income. In addition, you must be bankrupt remote entity, such as a Limited Liability Corporation, or an Irrevocable Life Insurance Trust.

In a normal premium financing arrangement, you would apply for a policy at the same time you apply for a loan. The loan is usually arranged by the insurance company you are working with although there are many different companies that handle only the financing and do not deal with the actual insurance policy. While you are being medically underwritten for the life insurance policy, your loan is being processed. Assuming you pass the medical exam and qualify for the loan, the policy and financing are put into place at the same time.

The benefits of a premium financing arrangement is that it frees up business and personal money to be used more efficiently in other investment arenas. In addition, life insurance premium financing may minimize gift taxes, and can provide a greater rate of return on the death benefit paid through regular non-financed methods.

Life insurance premium financing loans may be repaid either by paying a monthly payment while you are alive, pay from the policy itself, or at the time of your death, proceeds from the policy will pay off the loan.

Interest on the life insurance premium financing loan is considered to be personal interest, and therefore, not tax deductible.

If you are considering a premium financing loan for estate planning, there are some tax issues you may want to consider. The life insurance proceeds will be included in your estate if you own the policy. If the life insurance policy is owned by an irrevocable life insurance trust, estate taxes on the death benefits may be avoided.

Before you consider financing your life insurance premiums you should be aware that the life insurance policy will have to earn returns of between 150 to 300 basis points over the interest rate of the loan.

In addition, you should ask what the loan commitment fee is, as well as knowing whether the life insurance premium financing loan is renewable, how long the term of the loan is, and if the loan extends well beyond your life expectancy.

You may want to find out if the loan requires a personal guarantee, or if the loan is guaranteed by the life insurance policy.

Also, you want to know how if the program is designed on your IRS calculated life expectancy or is it conventional. If the loan is based on your life expectancy, and you live beyond that, the loan amount will exceed the cash value and the whole program will come apart.

Before entering into a financing agreement you may want to consult a trusted attorney, your financial advisor, and/or your Certified Public Accountant.

You will also want to shop around and compare insurance companies, their individual plans, the premium amounts, and the different types and amount of life insurance available to you.

Find the Best Mortgage Insurance Premium Plan for You

A mortgage insurance premium plan is required to be made in order to get a loan from various companies. It is for the bank’s own protection. It markets the risk of mortgage insurance quotes between the lending company and the plan provider. Mortgage expenses may be deductible. In order to be eligible, the plan cover must be for house purchase debts on a first or second house. Home purchase debts are loans in the case of which profits are used to build or buy and improve your residence. Thus house loan plans on cash-out refinanced and help-home equity loans won’t be eligible for the reduction.

Mortgage insurance premium expenses paid during the year are reported on specific forms which are sent out by the lender. Prepaid expenses can be designated over the term of the loan or 84 months (whichever period is shorter) under a judgment from the IRS (Notice 2008-15). Home loan expenses are itemized tax reduction type of costs and are revealed on Routine a Line 13. This is a separate short-term tax. It is efficient for mortgage plans released on or after Jan 1, 2007. Home loan insurance is a protection plan type of cover that reimburses lenders due to different types of loans obtained by them. It is a financial guaranty for the lender. When you are purchasing a home with less than 20% down or refinancing to 80% more than your home value, you have to choose a property type of insurance. It makes the lender’s money safe.

Many individuals think that a mortgage insurance premium plan is needless. But it allows individuals to buy their first house this way. Highest possible individuals cannot provide the whole price of their house by themselves. Mortgage insurance quotes help them get the money from various loan companies. Generally, if you make a big down transaction and have a plan to pay down your mortgage quickly, you will be able to decrease the amount of money that you owe. Generally, house mortgage interest is in fact any interest you pay on a loan that you have decided to secure with your house (main house or a second home). The loan may be a home loan used to buy a house, a second home loan, a line of credit or a house loan. You can deduct the house mortgage’s interest if certain conditions are met. You need to become familiar with such various conditions and make sure you follow the necessary steps to make the plans according to them.