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Premium Financing A service provided by BAKER ASSOCIATES.

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Presentation on theme: "Premium Financing A service provided by BAKER ASSOCIATES."— Presentation transcript:

1 Premium Financing A service provided by BAKER ASSOCIATES

2 What is Premium Financing? Premium Financing is a method for individuals to fund a life insurance policy without using liquid assets. Premium Financing is a method for individuals to fund a life insurance policy without using liquid assets.

3 How does it work? Borrower applies for life insurance policy Borrower applies for life insurance policy Baker Associates will fight for best possible underwriting offer Baker Associates will fight for best possible underwriting offer Borrower applies for premium financing through a third party lender Borrower applies for premium financing through a third party lender

4 Third party lender Sets interest rate and payment schedule for loan Sets interest rate and payment schedule for loan Requires collateral Requires collateral Life insurance policy Life insurance policy Additional assets Additional assets Baker Associates works with several carriers and banking facilities Baker Associates works with several carriers and banking facilities

5 Third party lenders

6

7 Possible Client High net worth client High net worth client Large insurance need Large insurance need Assets highly productive or illiquid Assets highly productive or illiquid Reluctant to free up premium dollars Reluctant to free up premium dollars

8 Client Eligibility $5,000,000 Net Worth minimum $5,000,000 Net Worth minimum $100,000 minimum annual loan (premium) $100,000 minimum annual loan (premium) Ability to post additional collateral if needed Ability to post additional collateral if needed Borrower must be an entity (Trust/ Corporation) Borrower must be an entity (Trust/ Corporation) Individuals eligible in CA and NY Individuals eligible in CA and NY

9 Baker Associates Bank (Lender) Borrower (Trust) Broker Insurance Company BAKER ASSOCIATES (A) (G) (A) Borrower requests services from broker (B) Broker engages Baker Associates (C) Baker Associates develops insurance program (D) Baker Associates presents to Bank (E) Bank makes offer and documents loan (F) Bank secures collateral (G) Death Benefit satisfies outstanding loan with balance paid to the Borrower (C) (D) (B) (G) (F) (E)

10 Concerns Interest rate risk Interest rate risk Collateral requirements Collateral requirements Potential loan maturity Potential loan maturity Unrealistic market expectations Unrealistic market expectations Most of these concerns are mitigated by proper structuring of the life insurance policy and loan. Most of these concerns are mitigated by proper structuring of the life insurance policy and loan.

11 Benefits Reduced out-of-pocket cost for life insurance coverage Reduced out-of-pocket cost for life insurance coverage Minimal or no impact on current investment portfolio Minimal or no impact on current investment portfolio Attractive interest crediting rates on borrowed funds Attractive interest crediting rates on borrowed funds Effective gift tax considerations Effective gift tax considerations

12 Example of Benefits Term Insurance Premium Finance Client Age Total Costs for 20 years* 1st year out of pocket costs Saving to acquire Permanent Insurance w/Premium Financing 45$249,300$117,448$46,675$131,852 55$595,300$193,267$62,500$402,033 65$1,959,300$665,360$95,750$1,293,940 *Based on preferred non-smoker rate; interest on premium loan capitalized.

13 Baker Associates’ Services Collection of required information for insurance policy Collection of required information for insurance policy Case design and illustration Case design and illustration Tenacious underwriting for client Tenacious underwriting for client Assist you in explaining options to client Assist you in explaining options to client Negotiate to provide the best financing available for your client Negotiate to provide the best financing available for your client

14 What carriers participate? Through Baker Associates you can access this special program with one of these top insurance carriers: Through Baker Associates you can access this special program with one of these top insurance carriers: John Hancock/ Manulife John Hancock/ Manulife American General American General MONY/AXA MONY/AXA Jefferson Pilot Jefferson Pilot Lincoln Life Lincoln Life

15 Contact Baker Associates BAKERASSOCIATES Gary M Baker: Frank Azar: Lori Calloway: Lisa Sauer: E Pinnacle Peak Rd, Ste 116B Scottsdale, AZ 85255


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