Premium financing for life insurance has been around for years, but its popularity exploded in 2003 when investors identified life insurance policies purchased in the secondary market as a potential portfolio holding. This has fueled the growth of the life settlement industry and raised important ethical issues surrounding the question of insurable interest. Yet, premium financing continues to be an estate planning tool that requires careful consideration. Surrendering the policy is an exit strategy that deserves careful consideration since it could trigger gift or income taxes, depending on who is guaranteeing the loan and who ultimately repays it. As a last resort, if the financing arrangement cannot be unwound without significant pain, a life settlement may be the only option.
Premium financing may offer high-net-worth individuals the ability to borrow the premiums to pay for an insurance policy, allowing them the use of funds they might have otherwise used to pay for the insurance. Premium financing makes most sense when the individual has a definite need for insurance. The goal of a well-structured premium financing program is to have the individual pay as little out-of-pocket as possible for life insurance, balanced against the risk that the interest rate of the loan will exceed the performance of the policy. Premium loans can be repaid in three main ways: 1. during life, from the borrower's available assets, 2. during life, from policy cash values, and 3. at death, from policy proceeds.
Pros, cons of altering insurance tax exclusion Supporters say changing it could: * Slow growth in premium costs by encouraging less-expensive health insurance. * Provide financing needed for a health overhaul bill. * End the advantage of those who get health insurance through their jobs tax-free over those who buy insurance on their own, who dont. Critics say that changing it could: * Increase the number of uninsured people, if workers or employers drop coverage. * Result in higher deductibles or otherwise less- generous insurance. * Penalize people whose policies cost more simply because they work for small companies, live in high-cost areas or have a preponderance of sickly co-workers. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Found...
The Maryland Insurance Administration's authority over premium financing companies got a boost Tuesday from the state's highest court, which found the commissioner has implied power to issue cease- and-desist orders against companies that charge too much interest on Maryland Automobile Insurance Fund policies. The Court of Appeals also rejected the companies' claims that their challenge to a 2008 cease-and-desist order should have been transferred to the Office of Administrative Hearings rather than decided by a deputy insurance commissioner.
... of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the... can be used to pay for larger policy premiums or can be invested within the ILIT and used to fun... insurance policies through a premium financing technique pursuant to which an ILIT purchases the ...
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