Over the last the five or six years, insurance agents and their clients have tried to find various ways to borrow money to buy life insurance. ?In the early years, the focus was on clients who needed insurance for liquidity and estate tax payment, but did not currently have the cash for the premium payment. ?Enter premium financing.
Under this structure, a client would borrow money (either individually or in a trust) and use the borrowed funds to buy life insurance. ?The idea was that when the client became more liquid, usually through the sale of an asset like a business or real estate, the loan would be paid off, and the client would take over the premium payments from their own cash flow.
Excerpt from The Complete Guide to Estate and Financial Planning in Turbulent Times (Collaborative Press, 2011) - Walt Dallas, Contributing Author
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