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How Premium Financed Life Insurance Works in 2024

In the realm of financial planning, premium financed life insurance has emerged as a strategic tool for many more people than ever before, especially since the pandemic rocked everyone’s plans. 

When we’re talking about buffer assets - something outside of your nest egg to draw from when the markets are in flux - it’s no secret that I’ve always been a proponent of PFLI.

Rather than seeing life insurance as purely an expense just to secure a death benefit, more and more people are recognizing the critical value of accumulating and distributing income tax-free.

How Premium Financed Life Insurance Works

At the core, the concept is no different than any other investment. Put funds in and earn interest. 

What sets premium financing apart, especially in 2024, is the benefit of creating a tax-free income stream with OPM, other people’s money. We work with banks who step in and enhance our clients’ contributions to their tax-free financial machine.

Not only do people with PFLI have a life insurance policy (that we hope you don’t need for a long time), but they also have - essentially - a high-yield savings account that offers tax-free growth and tax-free distributions.

Read it again! 

Tax-free growth AND tax-free distributions.

  • Unlike your 401ks and IRAs, stocks and ETFs, and everything except your Roth IRA, your PFLI policy earnings are not taxed. 

  • Your Roth IRA contributions are capped, and your PFLI contributions are not. So think of PFLI as almost a super-charged ROTH.  

Sound familiar? It’s not much different from your typical retirement plan in that way. It’s just a whole lot more tax-efficient.

Making Assets Work for You

The principle behind Enhanced Funding is to make your assets work for you even more. The “PF” part of PFLI is premium financing, where a lender finances a portion of the policy premium.

Why would a lender get involved? That’s actually quite simple:

The value of that financed insurance policy is a guaranteed asset. Lenders are keen to work with reputable insurance carriers in PFLI policies because there is essentially no risk to them. If the policy owner defaults on their contributions, the lender gets their investment back from the policy, not from the client.

The lenders are even happier when the hundreds of thousands of policy owners utilizing PFLI maintain their contributions. Why? 

Because everyone is earning now!

The insurance company is funded and pays interest on the value of the policies; the bank earns its piece, and the policy owner earns theirs.

How Premium Financed Life Insurance Creates Tax Benefits

The benefit is not just in earning potential but also in tax efficiency. Similar to how real estate investors benefit from tax breaks while earning rental income, Premium Financed Life Insurance allows investors to enjoy tax-free growth and distributions. 

This is made possible because the insurance company provides unique access to policy values, with the policy's growing cash value earning an impressive interest rate return, historically between 8% and 15% IRR.

People can further amplify their financial growth by leveraging life insurance as a tax-efficient investment vehicle. 

Remember that you do NOT need to finance your premiums to benefit from this strategy. Any amount you invest above and beyond the policy premium will earn interest. With that said, adding leverage is a good fit for some and is always worth exploring.

Please reach out with any questions you may have: or call 773-318-9608.



901 N Lake Destiny Drive, STE 380

Maitland, FL 32751


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