The past several years have been very hard on businesses. From temporary lockdowns, increased cost of goods, and labor shortages America’s business community has had to weather a perfect storm of costly disruptions. Add to this list the difficulty businesses have faced in procuring and retaining top talent and you can quickly see how the ability to provide competitive benefits during a time of financial uncertainty can be a tricky puzzle to solve. Clients who own businesses in this climate look to professionals to help them solve these issues. Fortunately, at least where competitive employee life insurance packages are concerned, there may be a solution that helps them keep their money in the company while providing a top-tier benefit: Life Insurance Premium Financing.
How does life insurance premium financing work?
Life insurance premiums are usually paid by the person or business that is taking out the policy. Premiums for several employees can add up to a large infusion of cash per month. This is worthwhile to the company because the ability to offer benefits such as a life insurance policy is a way to attract and incentivize sought-after talent. However, the money spent on these premiums might be taking funds away from other aspects of the business. This is where premium financing comes into play.
Premium financing a life insurance policy involves a business or individual purchasing a life insurance policy from a premium finance company and then securing a loan from a lender (commonly a bank) in the amount of the total premium cost of the policy. To obtain this loan, the lender will require collateral. It is possible to use the cash value of the life insurance policy to partially collateralize the loan from the lender.
Once the policy is purchased and the loan is obtained, the business may pay the interest on the loan, the life insurance company will administer the policy, and eventually, the loan can be repaid using a portion of the cash value of the death benefit. It is truly a win-win situation because of the freedom that it provides to the business.
Liquidity can be the difference between success and failure
The reason premium financing can be such a powerful tool to speak about with business clients is that it allows the business to offer fantastic benefits to their employees while conceivably only paying a fraction (the interest from the loan) of the cost to keep the policies active. This frees up capital to spend growing the business, making payroll, and continuing to thrive.
Clients who own businesses may not be aware of the option to finance premiums on life insurance policies. It is important to reach out to these clients to discuss the current benefits packages that they offer their employees to see how premium financing might help them retain more liquidity without sacrificing employee retention and loyalty.
During uncertain economic climates, cash flow is one of the most important safety nets a company can have. The ability to recruit the talent a business needs while keeping as much cash on hand as possible to not only survive but improve its standing amongst its competitors is the difference between success and failure. These past few years have seen many businesses shutter their doors forever and while there will hopefully be brighter days ahead, anything that helps keep cash in the business is good for the business.
Have the conversation
Insurative encourages producers to have a conversation about life insurance premium finance with clients who own and operate businesses. We are happy to help producers learn more details about the process and requirements involved. Insurative is committed to helping producers find opportunities for their business clients and discuss how premium financing can help them achieve greater control over their liquidity in these challenging economic times.
For more information contact us at 877-281-1311 or visit our website at insurativeus.com.