Life Insurance Premium Finance



Transcript

Hi, I’m David Mickelson at Mickelson Capital Consulting. Today’s topic is going to some new options and opportunities in the world of life insurance premium finance. Life insurance premium finance has basically moved to the forefront in recent months. And, basically the reason is, many people like insurance as long as they don’t have to pay for it. Nowadays, dozens of small to medium sized banks and credit unions have entered the space becoming life insurance premium finance lenders. And the reason is they’ve recently discovered that it’s excellent high quality, completely secure debt that they can have on their books, and it seems in this credit environment it’s a very popular thing for banks to do. So all over the United States many banks that would have not thought about being in this business have entered the business, which has opened up the doors for opportunity for insureds and banks alike. It is so attractive nowadays because it is 100% secure that borrowers are often buying as big a policy as they qualify for because there is actually very little out of pocket, and the amount of collateral that they have to contribute is very modest compared to the size of the transaction. These are very efficient type transactions because it resolves issues for families. Number one, there’s no large cash payments involved from the families. At most it’s interest payments. They don’t have to disturb the investments they have in place. Number three, and probably one of the more important things, is many families are faced with difficult gift issues when they buy large amounts of insurance. Having this kind of premium finance pretty well eliminates almost all gift tax issues in families. That’s in a nutshell what’s going on in the life insurance premium finance world. Oftentimes the policies that they’re using are either what we call equity index life insurance policies, and occasionally they are universal life. Sometimes the loans are based on LIBOR, and there are many new programs that base it on a variety of indexes that could be prime rate, LIBOR, or even international currency rates that are very attractive in this market. With that, I’m David Mickelson wishing you a good day with Mickelson Capital Consulting. Bye for now.

 

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