For those who are considering the purchase of a high face amount life insurance policy but who may not have the liquidity available to pay the large upfront premium that will be due, a premium financing arrangement may offer the perfect solution.
This technique can help business owners and wealthy individuals harness the power of leverage in order to come up with the funds needed to pay insurance premiums while still leaving other illiquid assets intact.
The Need for Premium Finance in Arizona
Even though the average per capita median income in the state of Arizona is slightly lower than the nationwide average ($48,711 versus $50,221 based on 2009 U.S. Census figures), the residents of this state still have assets to protect.
In fact, the median value of owner occupied housing units in 2009 stood at over $218,000 as versus the United States nationwide average of $185,400 (in 2009). Certainly, one of the best ways to protect assets is through the use of life insurance.
While many wealthy individuals and business owners with assets to protect see the value in purchasing a good solid life insurance plan, there are many who may not have the liquidity with which to do so – especially for policies that possess a face amount in excess of $1 million.
What is Life Insurance Premium Financing?
There is now a solution for the lack of liquidity when it comes to purchasing high face amount life insurance. This solution is referred to as insurance premium financing. This is a technique that involves the borrowing of funds from a third party lender with the purpose of the borrowed funds going towards paying the insurance premium that is due.
In some cases, borrowers can even obtain the loaned funds through an irrevocable life insurance trust. Typically, the loan terms are relatively short – sometimes even as short as a few months or one year, and oftentimes, the underlying life insurance policy proceeds may be used as collateral for the loan.
There are many benefits to premium financing, including:
- The ability to purchase the amount of life insurance coverage that is actually needed rather than the need to purchase based on a lower cost alone
- The ability to make large face amount premium payments without the need to liquidate other assets in order to obtain the needed cash
In addition, premium finance arrangements may also be made on multiple policies – all with a large combined total amount of coverage – as one single premium payment that will cover the entire group of plans.
Premium Finance Rules in Arizona
Similar to other financial strategies, premium financing transactions are regulated. It is this regulation that can actually assist consumers and insured policy holders who are considering the use of this strategy.
One of the primary ways that insurance premium financing is regulated is that all companies and entities that engage in these arrangements must be licensed. A license must also be obtained for companies that plan to acquire premium finance arrangements from insurance agents or brokers.
There are other rules as well that apply to premium finance transactions. One such provision is that a premium finance company will not be allowed to cancel the policy of an insured without providing a minimum of ten days written notices to both the insured individual as well as to their insurance agent or broker.
Some companies that transact this type of business will require that the borrower have at least some amount of down payment available. In the state of Arizona, down payment requirements in the range of 20 percent of the amount borrowed are not unusual.
In addition, a minimum number of repayment installments – usually in monthly allotments – are also common. This will normally depend upon the amount of the loan as well as the term of the underlying life insurance policy.
Arizona policy holders who plan to finance their insurance coverage through a premium financing arrangement may obtain additional information about premium finance in general, as well as the companies that are involved, by going to the website of the industry association – the National Premium Finance Association (NPFA).
Those who are in the market for a premium finance arrangement may also wish to have an attorney who is knowledgeable on the topic review documents and other materials that are associated with the transaction prior to moving forward. This will help in assuring that all of the legal requirements of the arrangement are being met as well as those regulations related to the insurance and the lending sides of the transaction.
There are a number of companies that focus on making premium finance arrangements that are located in Arizona. It is often a good idea to work with a local company, as many of the rules and regulations regarding these transactions are state specific. This can help to ensure that the premium finance arrangement meets both state and federal guidelines that are imposed.
Premium Financing Companies in Arizona
Arizona Premium Finance Company
Arizona Premium Finance Company finances a wide variety of insurance policies. The company has been in business since 1984 assisting policy holders in paying the premiums due on their policies.
The company offers information request forms directly on its website, as well as a way for insurance agents and brokers to order needed supplies. For additional information on Arizona Premium Finance Company, go to:
Arizona Premium Finance Company
12406 North 32nd Street
Suite 110
Phoenix, Arizona 85032
Toll-free: (800) 873-2732
admindept@apfcinc.com
http://www.apfcinc.com
Premium Financing Specialists, Inc.
Premium Financing Specialists, Inc. is also in the business of conducting insurance premium finance arrangements. For additional information, the company may be contacted at:
Premium Financing Specialists, Inc.
4600 East Shea Blvd
Suite 200
Phoenix, Arizona 85028
(602) 494-6980
AMC Fairmont Insurance Services
AMC Fairmont Insurance Services has a particular focus on insuring companies in the oil and gas industries. Other sectors that the company works with include agriculture and other similar businesses that may be considered as risky. For more information on this company, visit:
AMC Fairmont Insurance Services
Headquarters
824 Front Street
P.O. Box 2020
Conway, Arizona 72033
(501) 450-7400
Lakeside Center Office
11225 North 28th Drive
Ste. A-106
Phoenix, Arizona 85029
(602) 424-5514
Toll-free: (800) 233-2398 Nationwide
Toll-free: (888) 991-0300
