Amidst the low interest rates environment, premium financing is becoming an attractive option to finance insurance policies.<\/p>\n\n\n\n

Let me give a simple example of how it can make sense.<\/p>\n\n\n\n

For example, using a 1 mil annuity policy, paying 280k<\/strong> upfront and financing 720k<\/strong> at interest rate of 1.2% pa<\/strong>.
Yearly benefits can be up to $42,000.
Interest cost per year works out to $8,640.
Nett benefit after interest is $33,360.
This works out to a simple yield of 11.9% base on capital outlay of 280k.<\/p>\n\n\n\n

Yield can be maximised further with an efficient allocation of the 720k, which would otherwise been used to pay for the premium. This strategy can work in your favour if you do know how to exercise it.<\/p>\n\n\n\n

There are caveats to premium financing though. The most important of which is, premium financing should only be a discussion when the prospects has the capacity to pay the premiums out-of-pocket but chooses not to.  It should not be used to allow people to buy life insurance they cannot otherwise afford to own. Interest rate risk is also another factor to consider, as rates will vary. An increasing interest rate will increase cost of financing. Individual situation may differ. Do work with qualified financial planners to assist you in weighing the benefits vs the risk of premium financing.<\/p>\n<\/span>","protected":false},"excerpt":{"rendered":"

Amidst the low interest rates environment, premium financing is becoming an attractive option to finance insurance policies. Let me give a simple example of how it can make sense. For example, using a 1 mil annuity policy, paying 280k upfront and financing 720k at interest rate of 1.2% pa.Yearly benefits can be up to $42,000.Interest […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[15],"tags":[],"yoast_head":"\n