Probably the million-dollar question when you need financial assistance. Looking back over the year’s premium financing is not a new thing to the average citizen. Back then, the premium financing programs made it possible for the policyholder to fund the policy with non-recourse loans. The design guaranteed the policyholder a smooth-running until such a time that he managed to clear the debt. On the other hand, the lender had no jurisdiction whatsoever to go after the policy holder’s assets to necessitate payment of the loan in the event of a lapsed policy. Quite interesting, if I may add, those were the days when thinking twice was not an option when the deal was too good.
However, the design attracted unscrupulous agents who sold the premium to non-qualified individuals like the old insured. The fraudsters enticed the oldies with clauses known as “free coverage” to gain their approval. There were instances of fraudulent financial statements for the said purpose. Fortunately for today’s insurance industry, it’s goodbye to the non – recourse premium and hello to collateral–induced tips.
What is premium financing?
With all this information on premiums, the question still arises on what premium financing is. Well, first things first, premium financing leans more towards financing life insurance policies as opposed to properties or accident and casualty covers. That said, premium financing is lending funds to a company or person to cover insurance premiums.
- How does premium financing work
Financing a premium involves the company or person requesting a policy which, upon acceptance, the individual signs a contract with the premium finance company.
The loan arrangement is financed from the onset of day one to the end of the life policy. It then follows the disbursement of funds from the premium finance company to the insurance premium company The premium finance company then bills the company or individual. The payment terms are often in monthly installments.
Qualities that guarantee you premium financing
Currently, if one wishes to engage in financial premiums, the first thing you would do is look for a bonus that has a low-interest rate, which guarantees a minimal dent in your pocket during payment. However, for your request to be accepted, you need to meet certain thresholds, so how do you qualify for premium financing:
- The individual should be below the age of 70 – The more the years, the more expensive you are to insure as you inch closer to your life expectancy.
- Financially savvy – you are conversant with expenditure dealings, credits. In totality, you need to have a healthy financial background.
- Have additional collateral besides the insurance contract – These may be in the form of title deeds, cars, credit cards, or mortgages.
- A clear and precise financial need – A financial need is practically an expense that is likely to consume a large part of your earnings, e.g., car insurance
- The individuals should disclose his or her lending terms and fees to the insurance company.
- Should have an avenue for an exit without the option of death benefit payoff.
Well, here you are. The above are just some of the basic thresholds on how you qualify for premium financing. Always read and understand the logistics on any premium before signing on those dotted lines, as the risks can be catastrophic. You wouldn’t want to be on the receiving end.