Whole Life Insurance + Premium Financing

At ARI Financial, we use life insurance as a financial vehicle to provide personalized, customized, and dynamic solutions for our clients’ wealth enhancement and asset protection needs. In addition to the survivor benefit, which is tax-free to heirs, permanent life insurance coverage offers various lifetime benefits that can enhance your long-term financial security. By using Whole Life insurance, coupled with our Premium Finance, the ARI Financial strategy provides you with the best coverage possible without losing the opportunity cost on your assets.

WHY WHOLE LIFE?

Whole Life Insurance is a type of insurance coverage that incorporates both a permanent, increasing death benefit, plus a cash value component. The cash value grows and compounds tax-free with guaranteed rates plus dividends. Cash value can be accessed tax-free when distributed properly and premiums are guaranteed to be fixed and level. Whole Life Insurance is an asset that is uncorrelated to the market and serves and an excellent hedge against bond durational risk and market risk.

No other financial vehicle provides the guarantees, tax advantages, and leveraged benefits that permanent life insurance does:

  • Guaranteed death benefit, typically income tax-free to beneficiaries
  • Guaranteed premium that never goes up
  • Cash values grow tax-deferred
  • Policy can be used as collateral for a loan
  • May be self-completing in case of disability (if waiver of premium rider is available and has been selected)
  • Integrates easily with personal and business financial strategies

 

WHY PREMIUM FINANCE?

Premium Financing is designed for individuals who have a high opportunity cost on their investments and who understand the benefits of leverage. Through Premium Financing, clients can acquire a large block of permanent Whole Life Insurance and simultaneously retain the opportunity cost on their money.

Premium Financing is an innovative financial strategy designed to help individuals buy large amounts of life insurance for personal or business purposes, while leaving cash or other assets in place.

  • Retain Opportunity Cost of Liquid Assets
  • Positive Interest Arbitrage (Cash Value Dividends > Loan)
  • Conserve Lifetime Gift Exclusion
  • Maximize Use of Annual Gift Exclusion

To pay your life insurance premium, you have three options (1) Gift (2) Lend (3) Borrow.

If you decide to gift the premium, you will quickly consume your lifetime tax exclusion. If you gift or lend the premium costs, you will lose the opportunity cost on your liquid assets. So, ask yourself:

Why would you consume your tax exclusion and lose your opportunity cost on the liquid portion of your estate when you can utilize Premium Finance as a strategy to borrow the cost of the premium?

Premium Financing is a powerful estate planning tool that gives high-net-worth (HNW) individuals the ability to purchase life insurance using someone else’s money.

Premium Financing is a smart solution for those who have a definite need for insurance, but do not want to tap into their existing cash flow or liquidate high-yielding assets to pay for the premiums.

The advantages of Premium Financing are multi-pronged:

  • Keep the Opportunity Cost on Capital
    Premium Finance allows an individual to own permanent life insurance to use for estate planning or immediate asset protection without giving up any lost opportunity cost
  • Leverage Gift Taxes
    Purchasing Whole Life Insurance can be problematic as the high premiums may cause unintended gift tax complications. Borrowing eliminates this problem
  • Tax-Deferred Growth Retirement Income
    Dividends and growth in cash value can be distributed tax-free* and used for retirement income to devise a “401(k) look-alike plan”
  • Guaranteed Cash Value
    Whole Life is a conservative asset class with a guaranteed cash value, guaranteed premiums, and a guaranteed death benefit
  • Business Advantages
    Business owners can structure this strategy for multiple uses: Buy-Sell Agreements, Key-Man Insurance, etc.

*Dividends are not guaranteed. Dividends are declared annually by an insurance company’s Board of Directors. Cash value may be used to supplement retirement funds and may be considered income tax-free if withdrawals are distributed up to the policy’s cost basis and the gains are borrowed from the policy. Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any loans considered gain in the policy may be subject to ordinary income taxes. Whole Life Insurance provides death benefit protection for the whole of life as long as the guaranteed premium is paid. With payment of the guaranteed premium, you receive a guaranteed death benefit and guaranteed cash values inside the policy. Guarantees are based on the timely payment of required premiums and the financial strength and claims-paying ability of the issuing insurance company, which is measured by the four major ratings services. Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any loans considered gain in the policy may be subject to ordinary income taxes.

We provide our clients with unique,
customized, dynamic financial solutions
to meet their individual needs.