Those purchasing significant death benefit life insurance often contemplate how to most efficiently pay policy premiums. Their aim is to maximize insurance benefits, pay as little as possible and minimize taxes. One option is to borrow from a commercial lender, finance company or private bank. This complex strategy, called “premium financing,” can be powerful but isn’t appropriate for all investors. Let’s take a closer look at this tool.
Premium Financing Basics
Premium financing is a strategy that involves taking a loan and using the proceeds to pay policy premiums (and, in some cases, the interest on the loan itself) during an insured’s lifetime. Marketable security assets and the net cash surrender value (CSV) of the underlying insuran...
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