Five misconceptions about life insurance premium financing

Share on Facebook0Share on Google+0Tweet about this on TwitterShare on LinkedIn0

Published on 8/11/2020

A protection cover such as the one provided by life insurance is unmatched. While there are many insurance variants out there in the market, there is no other variant which comes close to matching the benefits of life insurance.

For many people, it is a dream and protection for their family. But not everyone can afford life insurance in one go. Although life insurance premiums are highly affordable, it can still be a significant amount for people who struggle to put two square meals on the table.

That is why a phenomenon called ‘life insurance premium financing’ was introduced some years ago.

The word financing itself denotes that someone else pays for an excellent/service that you want. Consequently, life insurance premium financing implies that your life insurance premiums are paid by someone other than you. This entity could be anyone; from your employer to an independent financier or even a financing company.

With life insurance premium financing, you can take advantage of the capital you have in your kitty and let a third party lender pay for your premiums. You can pay back the amount to the lender later along with total interest and other fees.

Life insurance premium financing has been at work for the most successful people in the world. There has been a lot of acclaim about this feature. Even you can benefit highly from it if you are finding it challenging to arrange capital to pay for your life insurance premiums.

Nevertheless, there is a lot to life insurance premium financing that may not be visible to an average individual who does not know about the finance world. There also are a lot of misconceptions and myths about it in the public domain. We help demystify most of these for you.

Misconception #1: Life insurance premium financing is a marketing gimmick.

Most people think that life insurance premium financing is a marketing gimmick. However, only smart individuals know that it is a means of simple financing. Just like financing or taking loans works or cars, property, jewellery or business; similarly, life insurance premium financing works when you have bought a life insurance plan. In fact, premium financing can be used for other insurance variants like term, health and many others.

Misconception #2: It can only be used for individuals.

More than a benefit for individuals, life insurance premium financing is a boon for corporates, businesses and employers. It is especially beneficial for group cases. When corporations are looking for bulk-buying of life insurance plans, life insurance premium financing can help them. This way, corporations can save their capital while getting premiums for life insurance at the same time.

Misconception #3: Life insurance premium financing has high-interest rates.

Life insurance premium financing is a sort of a loan which is bound to include some rate of interest. When a lender pays money to a borrower for any goods/service, they charge an interest amount. This is the case with any such loan. However, life insurance premium financing gives a benefit to the borrower since it allows them to control the interest amount that they are charged.

Misconception #4: Those approaching retirement ages prefer the plan.

Life insurance is a very wholesome insurance plan which guarantees retirement benefits to people in addition to acting as a protective coverage. Just like many other insurance policies, life insurance is opted for by people who are in their 20s and 30s. They are relatively younger, healthier and have better earning potential. In this age, premiums seem affordable to the person.

It is here that life insurance premium financing comes in and helps you pay for your premiums. While it is still helpful for people in their 40s who are soon approaching retirement or are looking to retire early, it is equally beneficial for relatively younger people.

Misconception #5: Premium financing only works for people with a high net worth.

One of the biggest misbeliefs is that life insurance premium financing works only for people who have a high net worth or who have high capital. Life insurance premium financing is indeed an excellent strategy for people who have an incredibly high net worth. However, it is also true that premium financing works equally fine for people in stages of life. Any person no matter how old they are stands to benefit from life insurance premium financing. 

Nevertheless, bear in mind that the ideal candidate preferred for life insurance premium financing will be someone who makes more than $250,000 in a year and has investments worth a minimum of $1 million. For small enterprises, an annual income of $175,000 and investments or assets worth $1 million is preferred by life insurance premium financiers.

Life insurance premium financing is the most practical tool available for individuals to get a life insurance policy in life, without having to move their assets. It comes in handy at times when there is a significant cash crunch with the organisation. Moreover, premium financing has supper affordable interest rates that can be reworked as per the borrower’s requirement.

There’s plenty more where these misconceptions came from. Here at MyTaxFiler, we have the life insurance premium financing solutions that can fuel your coverage needs. Finding out more by contacting us today at insurance@mytaxfiler.com.

Share on Facebook0Share on Google+0Tweet about this on TwitterShare on LinkedIn0