Premium Finance FAQs


Who is an Eligible Candidate?

An appropriate client for premium financing will fit the following guidelines:

  • Has a need for life insurance
  • Has a net worth of $5,000,000 or more
  • Has liquid assets sufficient to pledge as security for loan repayment
  • Meets Life Insurance underwriting guidelines
  • Meets the lenders minimum requirements

What are the Interest Rates and Loan Structure?

Interest rates vary, by lender, on all premium finance loans. Generally, smaller loans will have higher rates and larger loans will have lower rates. Additionally, lenders may also charge loan origination fees and legal fees that will increase the total cost of borrowing. Every lender has their own unique program with maximum loan terms.

How are interest Rates Determined?

In general, lenders set interest rates at a percentage above LIBOR (London Interbank Offered Rate). The percentage will vary based upon the size of the loan, the term, and perceived risks.

Is Collateral Required?

Collateral is a critical element of premium financing; as such, each lender's collateral requirements will be different. Furthermore, the valuation of collateral, and the type accepted by the lender, will vary.

What is an Acceptable Form of Collateral?

In general cash, letters of credit, cash values on other life insurance policies, real estate and marketable securities are acceptable forms of collateral. However, each lender will have their own unique requirements.

Please note that IPS Advisors, Inc. is not offering legal or tax advice. Any discussion of taxes included in or related to this document is for general informational purposes only. Such discussion does not purport to be complete or to cover every situation. Current tax law is subject to interpretation and legislative changes. You should consult with your own independent legal and tax advisors.

This material is for informational purpose only and is not meant as tax or legal advice. Please consult with your tax or legal advisor regarding your personal situation. NFP does not provide legal or tax advice.

To ensure compliance with requirements imposed by the IRS under Circular 230, we inform you that any U.S. Federal tax advice contained in this communication, unless otherwise specifically stated, was not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing, or recommending to another party any matters addressed herein.

Due to the relatively short period of time the life settlement market has existed, the market is currently loosely regulated and the number of bidders for any marketed policy may be limited. Prior to selling a policy, the insured should consider factors such as the continued need for insurance coverage, whether there are plans to replace the existing policy with another policy, how the sale of the policy will impact estate plans, and the availability of new insurance as well as the cost of comparable coverage. Where relevant, tax implications must also be taken into consideration.

Loans and withdrawals from insurance policies may generate an income tax liability, reduce available cash value and reduce the death benefit or cause the policy to lapse. Early withdrawals and other distributions of taxable amounts may be subject to ordinary income tax, a surrender charge, and if taken prior to age 59 ½, a 10% federal tax penalty may apply.

All guarantees are subject to the claims paying ability of the issuing insurance company.

Securities offered through Registered Representatives of NFP Securities, Inc., A Broker/Dealer and Member FINRA/SIPC Investment Advisory Services offered through Investment Advisory Representatives of NFP Securities, Inc. a Federally Registered Investment Advisor. IPS Advisors, Inc. is an affiliate of NFP Securities, Inc. and a subsidiary of National Financial Partners Corp., the parent company of NFP Securities, Inc. This site is published for residents of the United States only. Registered representatives and investment advisor representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

For additional information, please contact the NFP Securities, Inc. Compliance Department at 512.697.6000

An NFP Company

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