Premium Financing Using Life Insurance involves borrowing the funds required to pay for a life insurance policy from a third-party lender, such as a bank. Financing the premiums can allow an individual or a business the ability to defer using a large portion of income or assets to fund the needed life insurance policy. Due to a premium being borrowed, current out-of-pocket cost as well as gift tax costs may be reduced.

 

It is important to note that premium financing is not the only method of paying premiums. For example, premiums may be paid from savings, sales of assets or investments, after-tax income received from an employer or business, or from gifts from family members. Premium financing is not a toll that may be utilized to purchase a life insurance policy that an individual or a business could not otherwise afford. The ability to pay the life insurance premiums without using premium financing is a crucial for premium financing to be considered.