Premium Financing

Managing cash flow/finances can be difficult whether you are an individual or a business.  

Insurance premium financing involves the use of a loan that is used to pay for the insurance policy and in some cases, the policyholder does not need any collateral besides the policy itself. Insurance premium financing is a practical and effective way to help individuals/businesses that have a legitimate need for insurance.

When properly structured, this type of financing enables an insured party to spread their insurance premium payment over the term of a policy rather than paying the entire premium upfront. The insured then repays the lender based on the agreed-upon terms which usually consists of a down payment followed by a series of installment payments.

Insurance premium financing provides businesses with a wide range of benefits. Business owners are able to enjoy improved cash flow and asset liquidity.

This financing offer also serves as an additional source of borrowing and generally does not have an impact on the availability of any existing credit facilities. Insurance premium financing also makes it easier to keep up with premium payments as the entire amount is not required upfront

Financing your commercial insurance premiums gives you the flexibility to use your working capital more effectively. Freeing up capital can allow you to focus on product development, hiring new employees, marketing and other investments to grow your business.

25% down and nine monthly payments or

15% down and 10 monthly payments

Premium Financing can also be offered for fully earned policies, audits, bonds, and retrospective rated policies to qualified insureds.

Premium financing uses loaned/borrowed money to pay for life insurance premiums. This is most often done in conjunction with very large policies (that pay very large death benefits), so that the policy owner does not need to tie up their own capital.  In case scenarios where a business must have a life insurance policy, premium financing will allow the business to use free cash flow for its primary operations versus life insurance.  In some cases, the lender might require cash collateral and the goal would be to minimize the cash collateral requirement.  There are pros and cons to this strategy.  A pro to utilizing premium financing can be in cases where the insured must sell assets thereby triggering capital gains taxes had they liquidated assets to let them pay for the premium upfront.

Summary
  • Life insurance premium financing uses borrowed money to fund insurance policy premiums.
  • Large life insurance policyholders may find this option attractive in lieu of liquidating assets to find the cash.
  • The potential to earn a higher return on investments if the interest rate on the loan is lower than the rate of return on the life insurance policy
  • The three items to be aware of if pursuing this strategy include qualification risk, interest rate risk, and policy earnings risk.
  • A high area of concern for the policyholder would be that the cash value of the policy may not increase as fast as the interest rate.

Keen Coverage

It is our job to shop multiple insurers on your behalf. We will invest the time to get to know you and your family’s background so that we can offer a full insurance plan.  This includes health, life insurance, long term care, disability, business, and surety policies.

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