RESOURCES - premium financing
F.A.Q.'s

How is a life insurance policy financed?
Life insurance premium financing programs allow individuals who have a need for life insurance to acquire the insurance with little or no out of pocket expense by financing the premiums. In some financing programs, the borrower can capitalize all costs and interest expense. The term of the loan may vary from two-five years or for the life of the policy. Interest rates on the loans vary, depending on the financing structure and the collateral posted to secure the loan. Most loans are either Prime or LIBOR based. The underlying policy is the primary source of collateral. In addition, many programs require secondary collateral equal to 25% of the total loan.

How do I benefit from this program?
Financing your Life Insurance Policy enables you to acquire the amount of insurance you determine necessary to meet your objectives. Without impacting cash flow or liquidating assets, you can take full advantage of life insurance amounts that achieve your estate tax and wealth transference objectives. At the end of the loan term, a number of exit strategies exist based on your estate planning needs at that time. You can refinance the loan, you can pay off the loan and retain the insurance assuming responsibility for all future premium payments, or you can explore the settlement market. Each of these options should be evaluated based on suitability as it relates to your specific needs at that time.

How do my beneficiaries benefit?
If death occurs during the loan period, the beneficiaries receive the net death proceeds after paying off the total loan balance and any other expenses as spelled out in the contract. For example, assume the premium is $500,000 per year and death occurs during the second year on a $5 million policy. The net proceeds would be $5 million minus two years of premium ($1,000,000), minus interest expense and fees of another $100,000. The face amount of the policy, minus premium payments and fees would provide a total net death benefit of $3,900,000. (These are approximations for illustrative purposes only.) The beneficiaries will benefit by receiving a larger part of the gross estate. Financing also may allow for a larger beneficiary benefit by allowing the insured to finance their premiums and potentially acquire more life insurance coverage.

What is the profile of the typical client for this program?
To qualify, you must have a legitimate need for life insurance, have a net worth of at least $5,000,000 and be in generally good health.

For additional information please contact the Premium Finance Department
at Madison Brokerage Corp by phone or e-mail at:

Ted Kilkuskie – 888.539.3232 x4774

Tim Farrell – 888.539.3232 x4772

premiumfinance@madisonbrokerage.com