What is a premium financed insurance company? Put simply, firms that specialize in this type of investment vehicle have a unique skill set. They focus on matching each individual client with the right type of insurance policy and qualified lender.
Before we discuss what to know when considering a firm like this, let’s break down exactly how premium financed life insurance works:
First, a client contributes a lump sum premium for 5, 7 or 10 years (instead of a little bit each year for the life of the policy).
Second, a lender finances the policy with a lump sum to increase the cash value available in the policy.
The client’s contribution + the lender’s contribution = Investment Capital
Here’s an example:
John needs an $18,000,000 death benefit.
He contributes $50,000/yr for 10 years.
The lender overfunds the policy by contributing $15,000,000 (using the death benefit as collateral).
Enhanced Funding Solutions coordinates these funds with your policy holder, who offers an average investment rate of return of 8-15%.
Seeking more details about how Premium Financed Life Insurance works? Click below to download our free PDF with case studies.
Why Utilize Premium Financed Life Insurance?
One of the main benefits of a premium life insurance is leaving your capital as-is, untouched and growing.
Overfunding your life insurance means your invested asset is unaffected by market volatility.
As we enter a bear market, clients are seeking ways to protect their funds. Utilizing a buffer asset like premium financed life insurance means the client principal remains intact, and access to said buffer funds is not an issue.
Consider those who are newly retired or nearing retirement. If the only option is to draw from a retirement account invested in equities like the stock market and ETFs, every withdrawal is risky.
Drawing when the market is down significantly impacts the principal’s earning power. There is no faster way to go broke than pulling money out in a down market.
How do retirees not only survive, but thrive during a down market? Buffer assets.
If you never considered your insurance policy an asset before, now is the time.
How to Choose a Premium Financed Insurance Firm
Typically, working with this type of firm has been reserved for the ultra-wealthy.
Investors are often referred to a specialist like me by their financial advisor. They come to me when they’re ready to add a premium financed life insurance policy to their portfolio.
When I obtained my first policy at age 25 during my NFL career, I knew I would go into this industry after football.
First, because it’s all about creating opportunities and protection, just like my role as an Offensive Lineman.
Second, because I knew access to this type of investment shouldn’t just be for the super wealthy.
Third, because I gained significant experience as a client first. I knew what I wanted my policy to do and I learned through 15 years of experience exactly how to reach those goals.
Choosing the Right Premium Financed Insurance Firm
You are your own best advocate for your money, and it takes time to land with a firm you trust. Just like choosing your financial advisor, it’s imperative to conduct your own research.
Follow these steps to find a specialist you trust to help you identify ways to improve your policy’s performance:
Beginning with yourself is an important step in finding the right investment collaborator. In order to know what to look for, review your assets and goals so you have an idea of what you need in terms of benefit coverage. Determine how your current life insurance policy is performing. Is it costing you money or making you money?
Research firms by asking your network of financial representatives, relatives and trusted friends. Reach out to your current planner for a personal referral. Often, they have qualified relationships with someone like me who specializes in this type of service. Read the firm’s websites, Google Business listings, LinkedIn profiles and more.
Ensure you feel valued. Take meetings and talk through how the initial qualification period works. You can get a great feel for personality and experience in this type of meeting.
Remember, above all, an investor/advisor partnership must benefit the clients’ best interest. EFS focuses exclusively on Premium Financed Life Insurance because of its unwavering ability to strengthen client financial position.
Important things to remember:
Every type of investment comes with risk; PFLI is a low risk but long term option.
No one can promise an exact growth percentage or ROI (numbers will be presented in estimates, averages, ranges).
Review client case studies to ensure you never bet on averages but set realistic goals and expectations based on actuals.
In the view of what to look for in an advisor, identify the qualities you respect about your business colleagues and trusted friends.
Ask yourself: What kind of person do I want helping me secure more financial freedom in retirement? Someone who is:
Extremely honest and trustworthy
Very experienced with open lines of communication
Ethical and respectful
Provides realistic expectations
Prioritizes your best interests, always
Answers your questions in a timely and enthusiastic manner
If you agree with the bulleted list, you have established your “advisor requirements.” You’ve also just reviewed our firm’s core philosophies.
Since every life insurance policy and goals for growth are unique, EFS hones our expertise to ensure every client has specific, individualized support.
Choosing the right firm to help you leverage your life insurance is key. With the market in a volatile place, lining yourself up with a buffer asset is a great move.