Premium Finance of Life Insurance may sound like a complicated topic, but it is not. Here are the top 10 questions we get from our clients and partners:
What is Premium Financing?
Premium financing provides an avenue for the high-net-worth (HNW) individual with substantial assets to obtain permanent life insurance by borrowing premiums from a trusted lender while preserving the opportunity cost of their money. The loan is collateralized by the insurance policy itself and/or other assets. Premium Financing is a highly effective strategy that will meet many planning objectives for the HNW and UHNW individual.
What is Whole Life Insurance?
Whole life insurance is a form of life insurance that incorporates permanent, increasing legacy coverage plus a cash value component. The cash value grows and compounds tax-free with guaranteed rates plus dividends (the carriers we utilize have consistently paid dividends without fail for over 150 years.) Cash value can be accessed tax-free (when distributed properly). Premiums are guaranteed to be fixed and level (never increasing). Whole life insurance is an asset that is uncorrelated to the market and serves as the perfect hedge against rates.
Who is premium financing designed for?
It is designed for the young, healthy and wealthy. Premium financing is designed for HNW to UHNW individuals who understand leverage and have a high opportunity cost on their money.
What are the benefits of premium financing?
The individual can acquire a large block of permanent, whole life insurance and retain the opportunity cost on their money (investment in other areas that produce a higher return – business, real estate, etc.) Additionally, individuals with a large estate can utilize this strategy to transfer wealth and utilize the annual gifting rules in an efficient manner.
What are the risks of premium financing?
The three biggest risks to this strategy are carrier risk (insurance company failing), renewal risk (bank not renewing the loan), and interest rate risk (interest rates rising more than the growth in cash value.)
Carrier Risk: Insurance carriers have never defaulted on a death claim in over 150 years. Additionally, our financial partners, high-end banks, have stringently vetted each carrier, utilized and because of this, each loan is issued without a personal guarantee.
Renewal Risk: As this strategy is based on a long-term banking relationship (AUM, deposits, etc.), there would be no reason for the bank to call the loan unless the client pulls the assets from the bank.
Interest Rate Risk: Whole Life insurance dividends have historically served as a hedge against rising interest rates. However, should the client be sensitive to this risk, the client can purchase a swap and fix the rate for a specified term.
This sounds too good to be true…why haven’t I heard about this before?
This is a unique, sophisticated strategy that is only available to the HNW and UHNW clientele, and ARI Financial Group is a Premium Finance practice. Our expert advisors have developed the niche market of Premium Financing Whole Life Insurance strategies for those who reside domestically and internationally. Over time, our concentration in this area has led our boutique firm to become the foremost provider of financed Whole Life strategies.
What if I am too old or not healthy enough to qualify for premium financing?
We have alternative strategies for individuals looking for innovative ways to protect their estate, grow their assets, and transfer wealth. ARI Financial Group optimizes and customizes different aspects of the contract depending on each client’s profile and needs.
What if I already have life insurance?
ARI Financial Group reviews your current coverage and makes recommendations that keep pace with the constant product changes and offering improvements. Additionally, we have strategies that allow you to obtain or convert large blocks of coverage through the use of leverage and credit.
What Separates ARI Financial Group from the competition?
ARI Financial Group distinguishes itself by being the #1 provider of premium financed strategies in the affluent market. Founded by Eric Bouskila in 2009, our team is made up of specialists with broad backgrounds in finance, legal, accounting, asset management, and tax planning arena. We pride ourselves on service; as we have a dedicated team that is constantly reviewing policy performance with loan interest rate fluctuation making sure the strategy is performing at optimum levels. In summary, ARI is a Premium Finance practice.
I am extremely interested… What do I do?
Contact us at email@example.com for more information on how we can help you grow and conserve wealth through personalized service and innovative planning.