How to sell premium financing
What is Premium Finance for Life Insurance?
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so here's the problem years ago life
insurance professionals would receive in
depth sales training not only showing
different life insurance products and
how they work but the advanced planning
concepts that bring in the 5 6 & 7
figure commissions X fast-forward to
today and those types of training
programs are almost non-existent to
solve the problem of an inefficient
marketing efforts and advisers stumbling
around trying to understand how to do
business in the advanced markets trained
advisor leads the way and showing
top-level producers how to acquire
identify present and clothes advance
life insurance cases welcome to the
weekly ten minute concept training with
trained advisor
[Music]
I'd like to thank you for joining me
today today I want to talk to you about
an interesting and I think an exciting
topic premium finance now I want to make
premium finance simple because I think
it really is a simple topic to
understand honestly I think our clients
understand it a lot faster than the
advisors but if you put it in context
premium financing is really a great
leverage tool for the right client and
so let's not overcomplicate it when we
get into the details of what the actual
financing pieces are you know some of
that can get technical because it really
is is some technical issues but the
concept of premium financing should be
fairly simple and let me just let me
start by something we all understand
let's go buy a house so now we're going
to buy this house let me put some terms
to get this house this house is going to
be worth a million dollars
now you've found the house that's the
house you want to buy there's no
questions there now let me come over to
your bank account and in this bank
account you've got a million dollars
okay now I'm going to ask you a question
when you go to buy this house how are
you going to pay for it that's the
question how to pay now I'm going to
make an assumption I'm going to make an
assumption that most everybody that's
listening to me today they are not going
to use that million dollars in their
bank account to buy that million dollar
home they're going to come down here and
put a down payment
and then they're going to go get a
mortgage for the balance and I'm going
to ask you why why do we do that
because you had the money to go buy the
the house why didn't you just pay cash
now some people will but most people are
going to come down here and get a
mortgage there's a reason we get a
mortgage and if you look at it it's
cheap interest rates especially today
that's number one number two number two
I don't want to tie up my money and
three I want to leverage my assets so if
you think about this we've all most of
us have gone through them bought a home
we understand that and now let me just
change a couple things here instead of
buying a home let me come in here and
say this is a life insurance policy
now I'm going to put a million dollars
worth of premium into that life
insurance policy now I'm going to make
an another assumption to everybody
that's listening now when we talk this
life insurance policy most every advisor
is going to say take your money and pay
the premium why
why did just the change in the asset
change how we're going to pay for it
because I'm going to come back over here
and just tell you if I can go over to a
bank or another lender and get you cheap
interest rates allow you not to tie up
your money and help you leverage your
assets why would you look at this any
different just because we changed the
asset and I think now you start looking
at and saying I don't know and I think
the reason most people don't look at it
the same way is because we as advisors
don't present it the same way there are
lenders that will loan money on premium
for life insurance policies and it's
really no different than buying a house
the pieces are the same and we get the
same leverage so if you think about it
we're going to have our insured insurer
it's going to come down here and buy
this policy now we just go to a bank or
really I'm just going to say another
lender it's not always an outright Bank
could be hedge funds could be different
different lenders out there what I'm
going to do is borrow the money to pay
the premium now let's think about this
if this were a house I may have to put
some kind of a down payment I'm going to
have to have collateral
and I'm going to have to have a
repayment schedule all those things are
going to come into this premium finance
in most premium financing in today's
world this loan from this lender is 100%
collateralized and what that means is
they're going to look first at the cash
surrender value and second they're going
to have to you're going to have to put
up collateral to protect the lender
they're again no different than buying a
home when you buy a home the bank is
100% collateralized either through the
value of the home or the down payment
that you've got to put into it say
anything here our lender is going to be
100% protected so we either need a down
payment
we need collateral and then we have a
repayment schedule we're going to pay
interest most likely annual it's a lot
of the loans in today's world they're
not going to let you capitalize that
interest you're going to have to pay it
at least monthly or annually and then we
want to have a a balloon payment out
there at some point this has to end and
at some point we want an exit strategy
out of the financing now I can tell you
this death is one of the exits when you
die the bank gets paid off first the
rest goes to whoever you've named is the
beneficiary be careful here
I guarantee as long as our client dies
at the right time every one of these
scenarios looks great now I'm not going
to hold our client to dying at a very
specific time so I don't want death to
be the only
exit strategy we need to pay off the
loan at some point in time or have the
ability to pay off the loan at some
point in time either by the cash value
or other assets so if you think about
this if I have a business owner and they
know 10 years from now they're going to
sell their business we can use that as
the exit strategy so just we want to
play with that death is an exit but we
always want to have another exit so at
some point in time our client knows
we're going to turn the bank lending off
and the policy will continue without the
bank financing in place so there again
don't overcomplicate it when we get into
the terms of our lender that's going to
get technical and a little bit
complicated but as far as the strategy
and the concept premium finance is no
different than buying a home instead of
buying a home we're buying a policy we
just need to make sure that policy is
designed the right death benefit to make
sure if we died the loans paid off and
our client gets the money they need that
we have cash value growing in there to
act as part of our collateral and
potentially using that cash value to pay
off the loan so these are typically
shorter term payments build up the cash
value early and then we work through
what that exits going to be so we'll
talk more about the different strategies
here but as a know as an overall concept
keep the concept simple if you need help
on these we're always here to help
thanks for joining us today
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