What the Low Interest Rate Environment Means for Your Estate Plan: Life Insurance Premium Financing

{2:30 minutes to read} In a prior blog, we talked about a concept that is still very popular today called life insurance premium financing.

Life insurance premium financing is a strategy that takes advantage of a low interest rate environment. It’s not for the many, but it’s definitely for the few.

How It Works

Many of our clients with high net worth estates grow their businesses and their properties in such a way that they may be getting a better rate of return on their real estate, businesses and investment endeavors than the rate of return on a life insurance policy. They need life insurance for numerous estate planning reasons, but they don’t want to take the money out of their current assets.

For these few, rather than paying the life insurance premiums out-of-pocket, we utilize a third party to lend the client the money so they can purchase the life insurance. The way we accomplish this is through a very conservative design utilizing a:

• low commission;
• high rate of return; and
• guaranteed paid up in 10 years life insurance policy.

This contract has very high cash values and high internal rates of return. The cash values of the contract represent collateral for the lender, making the amount of collateral the client has to post relatively small.

These strategies can be wonderfully helpful in giving people the ability to secure the life insurance they need when they’re healthy and able to do so. Such strategies also put them in a position of creating a secure way to pay estate taxes rather than running the risk of having to liquidate properties.

The best candidate for this type of strategy would be people that have the ability to pay off these loans when interest rates change.

In today’s low interest rate environment, this strategy is a great opportunity. If you’d like to learn more about life insurance premium financing, give us a call and we’ll be happy to discuss it with you.

 

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS.  Strategic Wealth Advisors Network and Gassman Financial Group are not affiliated with APFS.

Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.