Published on 7/15/2020
The importance of having life insurance has grown over the past few months. The demand for life insurance among individuals has gone up. Additionally, companies have been offering insurance in their annual package to their employees.
However, the increase in demand for life insurance is proving to be expensive for companies, especially those with many employees. In such cases, life insurance premium financing is the most sensible thing to do.
What is life insurance premium financing?
The ideal situation for payment of life insurance premiums is when a person is gainfully employed in a company which provides them with life insurance as an additional perk to their job. Most people prefer insurance financing as it is cost-effective and saves a lot of money.
But what about those who do not have a job or an opportunity like this?
That is where life insurance premium financing comes in.
Life insurance premium financing refers to the payment of life insurance policy premiums by a third party. It is a sort of a loan or an arrangement with life insurance companies which is mostly done by big companies that have a high net worth.
However, life insurance premium financing can be used by both individuals and businesses alike. It can be used as a lucrative option by those who do not want to liquidate their existing capital to pay for insurance premiums or need a hefty amount for insurance.
Ideal occupations for premium financing
A lot of individuals and businesses are eligible for availing premium financing, but people in some specific occupations are preferred over others. Following is a brief list of such candidates.
A career in law is one of the most sought after professions across the globe. Contrary to the belief, it is also one of the most underpaid jobs in the world. It can also be attributed to the truth that the past few years have seen a surge in the number of lawyers, paralegals and even legal secretaries.
The number of law firms has also increased, making the competition stiffer amongst law honchos when they scout for clients. It has translated to a reduction in professional fees being charged which further means low salaries for their employees.
However, these cost-cutting measures do not mean that law firms ignore the benefits given to their employees. It is here that insurance financing can help them.
Doctors and healthcare workers are people who are into a highly respected profession which also generates a lot of revenue. However, the downside of the medical business is the fact that operating costs corresponding to it are very high. Hence, a significant chunk of the revenue generated is spent on managing the medical facility, including highly-priced drugs, pieces of equipment and technicians.
It leaves a tiny profit margin for the actual medical practitioners. Thus, life insurance premium financing is in the best interest of both the medical practitioners and hospital admin.
While the finance sector is the money-making sector, it necessarily does not spell money for the people employed in the industry. They guide people on saving money, investing money and wealth management; but are underpaid themselves. And whatever money they get is spent on compliance protocols, thanks to a strict regulatory setting.
As a result, companies may default on giving benefits like insurance to their employees due to a cash crunch. It is here that insurance premium financing may help firms meet these expenses.
Disruptions of cash flow and a liquidity crisis can make expenses like giving benefits to their employees difficult. The scenario may become even more crunched when there is a fall in profit-making activities, and the costs keep on mounting.
In such circumstances, life insurance premium financing may be the best bet for companies centred around the law, medicine, and finance.