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Your family is your responsibility and your life, and there’s nothing better than watching them succeed and sharing in their ambitions, dreams, and conquests. But should something unexpected happen to you, you’ll want to be prepared for providing the assurance your family needs to keep their futures safe and sound. At New Century Insurance Services Inc. , we’ll work with you to keep your family protected in the event of your untimely death.
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New Century is dedicated to providing security for you, your family and your business by creating financial strategies with unparalleled benefits.
We offer financial strategies for high net-worth individuals and small business owners alike when it comes to retirement, employee retention, death benefits, estate liquidity, business succession, buy/sell arrangements, philanthropy and more. The proprietary methods we use mitigate risk for tax-free products.
Life insurance premium financing involves taking out a third-party loan to pay for a policy's premiums. As with other loans, the lender charges interest, and the borrower (the insured, in this case) repays the loan back when the insured passes away.
This strategy may be useful to high net-worth individuals (HNWIs) who don't want to liquidate assets to pay for costly life insurance premiums outright. The primary benefit of premium financing is the ability to acquire needed life insurance at minimal current out-of-pocket cost.
Why Go For Insurance Premium Financing?
First, let's look at why people would even consider insurance premium financing. About 60% of Americans have a life insurance policy to make sure their loved ones would be financially secure if the insured passed away. Premiums vary greatly depending on policy type, your age, your health (and health habits) and, of course, the size of the policy. A 47-year-old nonsmoking man, for example, could get a 30-year $100,000 term life policy for about $29 per month; the premium would go up to about $40 per month for a $150,000 policy.
HNWIs, however, are typically looking for coverage in the millions or tens of millions of dollars to address business, inheritance and tax issues. A $25 million 30-year term life policy for the same person might run about $4,700 a month, and -- here's where it can get really expensive -- a whole life policy would start closer to $15,000 a month.
Because premiums can easily cost upward of $100,000 or more a year, premium financing can make sense since it allows people to borrow at a rate close to the Libor while keeping the money they would have spent in investments that yield a higher ROI. Premium financing can also prevent the insured from triggering capital gains taxes had they liquidated assets to let them pay for the premium upfront.