Premium Financing for High-Net-Worth Individuals

Premium financing is a strategy used by high net worth individuals and/or business owners to pay for (or finance) the premium for large life insurance policies. An individual, company, or trust borrows money from a third-party financial institution (such as a bank) to pay premiums to the insurance provider.

Premium financing can be an attractive option for clients who:

• Have substantial life insurance needs but would  prefer to avoid liquidating high-performing assets, and resulting taxable income, in order to pay the premiums.
• Have substantial life insurance needs but want to avoid using their lifetime gift tax exemption to pay the premiums.
• Are insurable at standard rates or better.
• Satisfy the carrier's underwriting guidelines.
• Meet these additional Allianz requirements:
•  Are between 18-60 years old
• Have a net worth of $5 million or higher 
• Have sufficient liquid assets (e.g., marketable securities) to pledge as collateral if required.

Note: While the loan will be secured by a collateral assignment on the policy itself,

there may be a need for the client to pledge additional personal assets as collateral, especially in the early years. Lenders tend to prefer assets that are liquid, such as marketable securities. If the client does not have sufficient liquid collateral, additional costs may be required to obtain a letter of credit.

• Premium financing is not appropriate for clients who cannot afford the premium.