What is the number ONE reason people object to owning Life Insurance? They object PAYING for it! Imagine if your clients do not have to use their own money to pay for their retirement, increase or add to their retirement income with income tax-free dollars, increase the value of their assets, protect those whom they love the most by leaving a financial legacy to future generations?
Life insurance can play an important role in helping achieve the legacy and financial objectives of an individual or family-especially those with significant taxable estates and illiquid assets such as privately held businesses and real estate. Life insurance can be a key in meeting the liquidity needs when selling assets is not the best choice.
When your clients determine that life insurance is the ideal strategy to meet their liquidity needs, it's important to choose the amount of appropriate coverage and type of policy. The next step is to decide how to fund the policy. Cash may be available to pay for policy premiums, but your clients may want to avoid reducing available cash reserves. Selling existing portfolio positions is another option, but this approach is not always desirable. Certain assets aren't easily liquidated, and even when they are, doing so may have unfavorable tax implications . Selling assets to free up cash may also eliminate the opportunity to potentially generate additional returns from the assets that were sold, or, in the case of a business, may have an impact on its balance sheet.
As an alternative approach to funding a policy, your clients may want to consider the potential advantages of financing life insurance premiums, which may provide owner more financial flexibility. This approach involves leveraging your existing assets rather than liquidating them. For more than 20 years, high-net-worth individuals have been successfully using leverage to acquire the life insurance they need. In order for high-net-worth individuals to continue to grow and protect their wealth, they need to take advantage of leverage and actively look for investment opportunities that yield returns greater than the cost of capital. In other words, many need life insurance to address inheritance, business and tax issues, but they'd prefer to keep the funds they would spend on life insurance premiums in investments that yield more profitable returns.
Premium finance is not a gimmick. It is not free insurance. It never was and never will be. It is not a play on the potential arbitrage between policy crediting rates and interest rates. Your client will have to pay interest to a lender and will have to post collateral equal to the difference between the cash surrender value of the policy and the loan balance.
Those who don't understand the true benefits of life insurance premium financing worry this is a tool dependent on interest rates or policy performance. But even when interest rates have been high and markets have been shaky, financially savvy agents have been closing deals by funding life insurance premiums. It is simply a tool to help your clients reduce the initial out-of-pocket expenses relating to the purchae of a life insurance policy and a way to keep their money working for them in their investments of choice. The economy, although sluggish, is moving again, and with rates hovering at all-time lows, premium financing life insurance makes more sense than ever.
If you're not using this financing tool, you should be, as there are many Successful agents out there who are!
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