Premium finance is a strategy in which a policyholder borrows from a third-party lender (a bank) in order to pay large life insurance premiums on a large policy.
This strategy allows the borrowing policyholder to purchase large amounts of life insurance, and in turn accumulate large amounts of cash value within that policy, while not tying up much of their own money in the process.
What is Premium Financing?
For the right person, premium financing can be a powerful strategy. Being able to obtain more coverage by leveraging a lender's money can significantly boost your retirement without taking on as much risk.