Life Insurance Premium Financing Keeps Your Liquidity

2007-03-08 10:33:40

( Insurance )



You would always want to secure your family’s income stream even after your death. Buying the right amount of life insurance ensures that there is an income replacement for your dependents.

Premiums can be costly. If you don’t shop around and be updated regarding the latest life insurance innovations and products like return of premium life insurance and life insurance premium financing, you might end up buying a product you would not have bought in the first place.

Life insurance premium financing may seem complicated and unappealing to you. The concept of life insurance premium financing is to borrow money from lenders to pay for your whole life or term life insurance premiums. You may find this idea of financing counterintuitive, unlike when you finance your home or purchase goods using your credit cards.

Life insurance premium financing caters to individuals who need insurance cover but want to invest in higher-yielding financial instruments and to forestall cash flow problems. Many financial experts would advise you that life insurance policies are not the best investments in the market. You could end up earning more if you put your money in higher-yielding investment products.

You may have enough cash to pay for whole life or term life insurance premiums. But if you use that cash to purchase life insurance, you could end up cash-trapped. This is especially true if you have a business where you need liquidity or your cash is tied up in real estate or other investments that you choose not to liquidate. By getting life insurance premium financing you maintain your liquidity while being fully insured at the same time.

Keep in mind though that life insurance premium financing is only a good option if you really can afford to pay the premiums in cash today. Otherwise, it would not be wise to choose this option.


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