top of page

Guaranteed Downside Protection: Premium Financing Life Insurance

Lately I’m hearing a lot of people talking about when they’ll start investing for retirement again.

When the market is down, it’s understandable why people might think now isn’t the time to invest.

When the market is down, people tend to be cautious in making new investments. Often traditional investments – like stocks, real estate, and other markets are affected by extenuating circumstances.

However, it’s the best time to invest in fixed assets, like premium financing. This type of buffer asset, sometimes called LIRP or Premium Funded Life Insurance, means your portfolio always has a fixed asset offering guaranteed downside protection.

The truth is, you can’t wait to invest. You just have to make wise decisions with how you invest, to be able to not only protect your nest egg, but to have a chance of growing your nest egg even during a bear market and extreme volatility.

What is Premium Financing?

When you read the phrase, “premium financed life insurance” what do you think? I’ll admit, when I say this in conversation I often see peoples’ eyes glaze over.

Put simply, this investment strategy leverages the value of your life insurance policy for the asset it truly is.

Here’s how it works, in four steps:

  1. Enhanced Funding Solutions works with a clients and often clients’ advisors to determine the best policy based on individual needs and retirement goals.

  2. The client contributes an outlay for 5, 7 or 10 years (instead of a little bit over three decades). With cash value up front from the contributions, this large insurance policy is an instant asset.

  3. With the death benefit as collateral, a qualified lender further contributes to the cash value of this policy. Client contribution + the lender’s contribution = A Multiple of Investment Capital

  4. The insurance company provides a return that has a historical average cash on cash interest rate return of 8% – 15%. This enables the client to grow tax-free wealth.

When we’re looking for guaranteed downside protection, this type of interest based investment is top of mind.

Remember, we are still in a historically low interest rate environment when considering the last 40 years. 

I encourage clients to reach out to me with questions. We pride ourselves on our transparency and have countless case studies to help during the consideration phase.

Jeff Faine Enhanced Funding Solutions-5

Now, let’s talk more about the tax-free element of this strategy.

Tax Advantages with a Premium Financing Life Insurance Strategy

In general, life insurance policies are considered non-taxable income upon payout to the beneficiary.

The same is true for premium financed life insurance.

In addition, the “premium” aspect of this type of life insurance policy is so relevant because the cash from the policy is earning interest tax-free

Best of all, when you retire and access money from this account, your distributions are also tax free and have absolutely no qualified asset restrictions. 

Anyone earning more than $200,000/year should consider this strategy – it’s not just for the ultra wealthy seeking tax advantages. Once you start moving into the upper brackets, this kind of savings makes a huge difference as the years go by.

Learn more about how to qualify for premium financed life insurance and contact us to get started.


Let’s break down the tax benefits of premium financed life insurance:

  1. When beneficiaries receive the benefit, it is non-taxable income.

  2. The cash earning interest in your policy grows tax free.

  3. During your retirement, you pay no tax on distributions from your life insurance policy’s investment account.


901 N Lake Destiny Drive, STE 380

Maitland, FL 32751


Be the first to hear about industry news and stay ahead of the curve on all things premium financing + tax and retirement planning.

bottom of page