| Premium financing is the lending of funds to an
individual, trust, or company to pay the premiums on a life insurance
policy. The financing of life insurance policies has existed for
several decades and the industry is experiencing significant growth
as individuals increasingly look to finance policies as opposed
to paying their premiums upfront or over time. Growth also has
been generated by the development of a robust secondary market
for life insurance policies which generate a market value for
life insurance policies, enabling them to be accepted as collateral
to lenders.
In general, loans to finance life insurance policies are collateralized
by the policies themselves, either through their cash surrender
value or market value, and additional collateral is typically
required such as personal guarantees, cash, letters of credit,
or other assets, depending upon the lender.
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