Life Insurance Premium Financing Companies
Life Insurance Premium Financing Companies
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Is Life Insurance Premium Financing A Smart Move For You?
Although people may understand the need for life insurance, sometimes it can be a burden to pay the monthly premium. This is particularly true for senior life insurance as retirees are often living on fixed incomes and have limited ability to pay their expenses.
Premium financing options are available to allow people to keep up their payments and maintain their policies.
How Life Insurance Premium Financing Works
When the insured doesn’t have the income to cover the monthly premium, the payments are borrowed from a third-party lender such as a bank or from the insurance provider itself. The amount owed the lender will increase over time. Every month the insured borrows the premium amount plus the accrued debt earns interest.
In most cases, the lender is reimbursed upon the death of the borrower by taking a portion of the life insurance value before it is passed on to the beneficiaries. Although the amount owed steadily rises, as long as it is less than the total value of the policy then the beneficiaries still receive a benefit. This is considered preferable to canceling the policy due to inability to pay, thus leaving the beneficiaries with nothing after the policy holder dies.
Who Should Consider This Option?
Life insurance premium financing is a viable option in several cases. Premium financing is a popular option among retirees. They often have their assets tied up in investments and may not wish to liquidate their assets to provide cash. Some investments can’t be sold or can be sold only at substantial discounts so borrowing is a better financial option.
Some individuals without substantial assets also consider premium financing. Even considering the cost of the loan, leaving something to their heirs is deemed more important than losing the policy completely.
In some cases the interest rate on the premium loan may be less than the return on investments, making liquidation the less preferred choice. Or the interest rate may be less than the rate of return on the life insurance, making borrowing preferable to canceling the policy. There are also situations where this arrangement carries tax benefits.
Seek Expert Advice Before Making A Decision
There is no simple formula for determining who would benefit from life insurance premium financing. As with all investment choices, the advice of an experienced financial counselor will help you determine if this is the right option for your set of circumstances.
If you decide that this is the right financing option for you, there are some details that will need to be attended to. A trust will need to be created to coordinate payments from the financing company to the insurance and from the policy to the beneficiaries after the policyholder passes away. If the trust is not set up, the payout may be held up in probate or subject to substantial estate tax.
About the Author
Author is a freelance copywriter. For more information on Premium Financing
please, visit http://www.ifgins.com.
Do Breach of contract laws no longer exists, or simply too many loop holes ?
If a pesron pays premuims to a company for life and health insurance that he/she was employeed with should not the claim be honored ? Could this be the signs of facsism gone to “seed” in this country (USA) ? Check Yahoo Finance Report. Employers use federal law to deny benefits
Saturday July 5, 11:31 pm ET
By Mark Sherman, Associated Press Writer
Workers — and some judges — frustrated in legal fights over benefits with large employers
WASHINGTON (AP) — Dying of cancer, Thomas Amschwand did everything he was told to make sure his wife would collect on the life insurance policy he had through his employer.
“He was obsessed with dotting every `i’ and crossing every `t’,” Melissa Amschwand-Bellinger recalled about her husband, who died in 2001 at age 30.
Amschwand-Bellinger received a refund of the few thousand dollars in insurance premiums she and her husband dutifully had paid. The total, she said, would not cover the costs of his funeral.
Breach of contract laws still exist. The only basic loophole, is when the “agreement” is illegal. You can’t “agree” to exempt yourself from the law.
I think you need to look up the definition of “fascism”. Because the USA is a capitalist system, not a fascist system. CUBA is an example of a fascist system, so I think maybe you’re not sure what the difference is between those two systems.
Keep in mind, an employer is USUALLY not allowed to sell health insurance. They offer access. They are SUPPOSED to add the person to the group policy, and turn over the premiums to the insurance company. They also pay towards the premiums, also. They don’t have the AUTHORITY to “bind” coverage. So if the employer embezzles the funds, and never adds the person on to the health insurance policy, why would you expect the claim to be covered? The EMPLOYER breached the contract. The EMPLOYER is on the hook to pay the “claim”. NOT the insurance company!!
I’ve seen this case. I haven’t heard if the employer was sued or not. I HAVE heard that the insurance company was sued. Clearly, the insurance company won, because THIS GUY WASN’T INSURED!! In MY opinion, the EMPLOYER should be on the hook for the benefits. There is even an insurance coverage that employers can buy, for times when the HR department screws up like this – called Employment Benefits Liability Coverage.
If they only sued the insurance company, that’s why they lost. If they sued the employer and lost that one also, maybe it’s because someone screwed up in prosecuting the case. Kinda like OJ Simpson, getting off the hook, when everyone KNOWS he did it.
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