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Premium Financing Quarterly

Premium Financing: Best Practices For Best Interest When the leverage of financing can lead to greater gain, it is in the client’s interest to know about the strategy

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remium financing is becoming more popular as agents see its value for high-earning and high net worth clients. These clients have all their wealth in a business or a farm, which means a jumbo-size estate for their heirs or partners to handle but no cash to buy the life insurance for proper planning. After all, interest rates have been so low and equity returns so high for so long that premium financing looks like a slam dunk, especially when used with indexed universal life. And although it’s a sound strategy for clients who want to preserve their liquidity or make an arbitrage play, it’s important to note that financing carries risks. That is particularly true in this age of greater transparency and more emphasis on clients’ best interest. Advisors need to be certain that they are not only looking

out for their clients’ interest, but also they are professionalizing their process to provide accountability. To ensure that premium financing is in the client’s best interest, follow these steps.

It All Starts With Life Insurance

Of course, any premium financing arrangement must first start with an assessment of the client’s life insurance requirements. “There needs to be a clear insurance need, which generally means business or estate tax,” explained Mark West, national vice president of business solutions at Principal Financial Group. If the client lacks the liquidity to pay for the coverage, then premium financing not only makes sense but also serves the client’s best interest. “Premium financing is for clients who understand arbitrage and have a better use for their money,” said Todd Ford, president of Executive Retirement Solutions, in Rancho Palos Verdes, Calif.

In This Issue...

Premium Financing: Best Practices For Best Interest When the leverage of financing can lead to greater gain, it is in the client’s interest to know about the strategy. PAGE 3

How To Win With Attorneys And Premium Finance How lawyers and agents trust one another in high net worth cases. PAGE 7

Ask The Expert With Tim Whitmore Why is premium financing so big today? How important is it for advisors to manage cases after the sale? PAGE 10

February 2020 3

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Premium Financing Quarterly - February 2020  

Brought to you by Life & Annuity Masters.

Premium Financing Quarterly - February 2020  

Brought to you by Life & Annuity Masters.

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