Premium Financing

Premium financing is the lending of funds to an individual, trust, or company to pay the premiums on a life insurance policy. The financing of life insurance policies has existed for several decades and the industry is experiencing significant growth as individuals increasingly look to finance policies as opposed to paying their premiums upfront or over time. Growth also has been generated by the development of a robust secondary market for life insurance policies which generate a market value for life insurance policies, enabling them to be accepted as collateral to lenders.

In general, loans to finance life insurance policies are collateralized by the policies themselves, either through their cash surrender value or market value, and additional collateral is typically required such as personal guarantees, cash, letters of credit, or other assets, depending upon the lender.