Premium Financing Companies are typically insurance firms with a specialty in the premium financing life insurance niche. In some cases, specialty lenders may refer to themselves as premium financiers as well.
If you’re interested in learning more about how premium financing works as an investment strategy, you are in the right place.
Beyond understanding the basics of this strategy, it’s important to know how premium financing companies actually work.
This ensures you can feel confident when choosing a firm to join your financial team (Advisor, CPA, etc.) on your journey to grow and protect wealth for retirement and your heirs.
How Does Premium Premium Financed Life Insurance Work?
Let’s look at the overall benefits of premium financed life insurance policies.
Keep more of your invested assets untouched
Double tax advantage
Guaranteed downside protection and access to tax-free income as needed
Average historical rate of return: 8-15% of cash value of your policy
So, how does it work? There are three main steps for utilizing this strategy:
First, you contribute a fixed lump sum for 5, 7 or 10 years, overfunding your insurance policy’s cash value.
Rather than paying a little bit each year for 3 decades, you outlay a larger amount in the present to jump start the growth potential.
Second, a lender enhances your contribution with premium financing to significantly increase the cash value of your policy.
The premium financing loan can be covered by the value of your life insurance policy.
Lastly, the insurance company pays interest on the overfunded value, earning you tax-free cash value growth.
The income available from your overfunded policy is accessible to you at any time, completely unrestricted, and has no fees or taxes upon distribution.
As a policy holder myself (two policies on my life, one on my wife’s life and two on our kids), I feel strongly that premium financing companies should be very transparent about the way we work.
Of course, when researching an investing strategy, you should also be researching the firms that specialize in those strategies.
The EFS team is on a mission to educate clients why overfunding your life insurance policy is a low-risk option to add to your portfolio.
We think of PFLI as a Buffer Asset – an account with accessible funds to use when you cannot or do not want to touch your other assets.
How Do Premium Finance Companies Work?
Put simply, a company that specializes in premium financing is just an Insurance Advisory Firm with a highly specialized niche.
EFS sells insurance. Unlike the vast majority of insurance firms though, we work with providers and lenders throughout the country to enhance our clients’ policies beyond just a death benefit.
So, step one with any client is: securing a better life insurance policy.
There is NO cookie-cutter PFLI policy. Each one should be uniquely modeled based on the individual client. Remember that!
When vetting premium financing companies, be sure to inquire about how their modeling works and how you access the account. Transparency is key when considering any new financial opportunity.
Why I Chose Premium Financed Life Insurance as My Profession
I am a retired NFL player; I first invested in a premium financed life insurance policy over 15 years ago in my mid-20s.
I had a great experience with my returns and tax advantages. As my portfolio and policy grew, I was amazed how many of my NFL peers, friends and family had no clue about this type of investment.
So, I spent over a decade learning the intricacies of this niche. I needed to become an expert so that I could enable more people to widely use this strategy.
There is still a misconception that PFLI is only for the wealthy. That is just not true.
I am always willing to educate clients so they feel 100% confident in their new buffer asset investment.
Together, our partnership can help your portfolio grow, reach your retirement goals and build your legacy.
Conclusion
There aren’t many Premium Financing Companies out there. Mostly, there are investment firms who mention the strategy to their high-net worth clients.
I am changing that. For many, this is likely a completely new way to invest – even though the practical and proven method has been around longer than I’ve been alive.
That is exactly why my company exists. In most cases, a low-risk premium financed life insurance policy is just what your retirement portfolio needs.
To learn more about how Enhanced Funding Solutions can help make your money work smarter and harder for you, reach out any time: jeff@enhancedfunding.com or 773-318-9608.