About Premium Financial Services
Premium financing involves the lending of funds to a person or company to cover the cost of an insurance premium. Premium finance loans are often provided by third party finance entity known as a premium financing company; however insurance companies and brokerages occasionally provide premium financing services through premium finance platforms. Premium financing is mainly devoted to financing life insurance which differs from property and casualty insurance.
To finance a premium, the individual or company requesting insurance must sign a premium finance agreement with the premium finance company. The loan arrangement may last from one year to the life of the policy. The premium finance company then pays the insurance premium and bills the individual or company, usually in monthly installments, for the cost of the loan.
Typically, clients that engage in this transaction are age 29 to 75; with net worth of $5MM or greater. Younger clients benefit in the current environment due to the advent of premium financed indexed universal life policies.