For high-net-worth individuals, premium financing can help fund large life insurance policies without using personal funds:
- Third-Party Financing: A lender pays the premiums, and the policy serves as collateral. The insured repays the loan, often using the policy’s cash value or death benefit.
- Tax-Advantaged Strategy: Premium financing can enable substantial life insurance coverage for estate planning or wealth transfer with minimal out-of-pocket expense.
- Risks and Costs: Premium financing is a complex strategy with interest costs, potential credit risks, and tax implications. Professional guidance is essential.
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