Opulen Capital Life Settlement: What is Premium Financing and why should you care?

If you’re considering offering your life insurance policy to the life settlements market or you need some financial assistance now for estate planning purposes, premium financing may be an option. A premium finance program is a customized financing method designed to give insureds money up front to cover the cost of their life insurance premiums.

In short, premium financing exists to help insureds cover the costs of insurance premiums. While premium finance companies exist, most insurers offer some form of premium financing. Insureds contract with the premium finance provider for a loan that lasts for the life of the insurance policy. This contract pays all premiums and bills associated with the policy and charges the insured a monthly bill for that loan.

The more typical premium finance agreements are:

• Premium only. Only the premium amount is borrowed and the borrower pays the interest, except in the case of an irrevocable life insurance trust, where the interest accrued is considered a gift.
• Premium and interest. In this case, the policy must earn more than the interest rate, or the insured will be facing either a lapsed policy or a significant payment.
• Some premium and interest. Financing just a portion of the premium and interest, which allows the borrower a faster payout or shorter financing terms.

Premium financing comes in handy when investors seek to purchase life settlements. A premium financing agreement provides funding that satisfies any large initial payments due the insurance company. Also, those taking out such contracts are able to use one premium financing deal to fund multiple insurance policies, streamlining the premium payments from several to one loan payment.

Financing life insurance premiums is a fairly straightforward process for all involved. Brokers must submit all premium finance agreements to the premium finance company and the policy holder is given clear documentation of all loan agreement fees, amounts due, and due dates.

However, questions arise as to the interest rates associated with premium financing deals. Some experts contend that because the interest due on the premium reserves is based on an index, any increase in index interest rates will also cause the premium finance rates to increase. However, some experts say that premium finance agreements come with fixed interest rates.

Some questions to ask when considering a premium finance agreement:

• What is the loan commitment fee?
• How much return must the policy produce over the loan interest rate?
• For what length of time is the loan renewable?
• Is collateral beyond the insurance policy required?
• Which life insurance policy is best suited for a premium financing agreement?
• What is the program based on – life expectancy or conventional coverage?

For help understanding the answers, give us a call. The financial experts at Opulen Capital can help you unravel the premium finance puzzle and find solutions that help you get into the life settlements market with minimal effort.

Located in La Jolla, California, Opulen Capital is a specialized financial services firm focusing on products and services tailored for senior citizens. Opulen Capital is one of the leading firms offering Life Settlement opportunities for high net worth clientele. We leverage unrivaled experience and exclusive relationships in the life settlement marketplace to structure, obtain, and sell life insurance products to maximize cash profits for our valued clients. Opulen Capital’s mission is to continue to provide the best solutions for our clients through the highest level of integrity and service. For more information, visit our website at http://www.OpulenCapital.com or call Opulen at 877-OPULEN-1 (877-678-5361)