Life Insurance Premium Finance Question

Monday, June 02, 2008

How is a policy financed, do I need to consult an elder law attorney first?

There are numerous types of premium financing programs and companies in the market today. Their requirements and financing can greatly different. I found this information on a popular site.

Generally, the premium payments are financed through the creation of a Trust. The investor funds the Trust with sufficient capital to make timely premium payments throughout the first two years of the policy. This is accomplished through a two-year, collateral specific loan to the Trust (two years is the minimum period of effectiveness required for sale into the Life Settlement Market).

During its term, the loan is secured by a collateral assignment against the life insurance policy, whereby the borrower has assigned all rights, claims, options, privileges and interest in the funded insurance policy up to the value of premiums paid to that date. The collateral assignment of the policy ensures that its loan will be repaid in the event of premature death (death during the two-year premium loan term).

On the anniversary of the second year, the insured has the option of repaying the outstanding loan balance and assuming premium payments, or completing a Life Settlement. This provides the insured with a two-year financing option period, at the end of which the Insured can decide whether or not to continue coverage.

We recommend if you should consult an attorney or accountant to understand how the financing can be structured.

Visit the below sites for more info:
Premium Finance Life
Life Settlement Pro