What Is Insurance coverage Premium Finance?
A premium financing deal includes the loaning of loan from a bank or hedge fund to pay the premiums of a recently originated insurance coverage. Premium finance is offered to senior citizens age 65 and older. The majority of financed policies have a face quantity of over $1,000,000. The senior will obtain the money for an established length of time ranging from 2 years to life. The exact same banks and hedge funds involved in life settlements are also the lenders for premium finance deals.
Elderly people who receive premium finance are typically in excellent health with a high net worth. Financing is a fantastic financial tool for seniors who require the coverage of an insurance coverage for estate planning or wealth transfer. It enables these health seniors to buy the policy at little to no expense expenses.
Much of the financing choices readily available today are approved by the insurance coverage carrier. These programs, called option funding, involves the client putting up a letter of credit or other form of security to offset the loan ought to there be a default. Non-recourse funding utilizes the policy as the only security requirement for the loan. Should the insured default on the loan the rights within the policy would revert to the lender. It should be kept in mind that there are no recorded occurrences of a lending institution working out the letter of credit or collateral in an option finance offer. The lending institution constantly takes control of the policy as in a non-recourse program.
At the end of the loan term the insured can pay the total loan amount plus interest to the lending institution and keep the policy. If the protection is no longer needed or desired the policy can be marketed and offered in the secondary insurance market. The profits from the exact same will be utilized to repay the loan provider with the remainder going to the insured. If the policy is no longer required or wanted and not commercial the policy will revert to the lending institution.
Premium financing is the fastest growing sector of the secondary insurance market. Lots of baby boomers are possession abundant and money poor with a need for the protection offered by an insurance policy. All seniors who suit this category should contact their monetary consultant or life settlement and premium financing broker to talk about the alternatives offered to them.