Premium Finance
Premium Finance Is Leverage. The Math Has to Add Up.
Premium finance funds the annual premium on a large permanent life insurance policy through a third-party lender. The client posts collateral, the loan is eventually repaid from the policy’s own proceeds, and the net death benefit is what becomes the legacy. Used correctly on the right client, it puts a multi-million-dollar policy in place without liquidating other assets. Used incorrectly — on the wrong client, with the wrong assumptions — it is one of the most dangerous structures in the industry. The difference is the math.
Begin a conversation →Three structures. One policy under leverage.
The interest on the premium loan can be paid annually, partially capitalized, or fully capitalized into the loan balance. Each structure runs different leverage and different rate-shock exposure. The right answer depends on liquidity, time horizon, and how much rate movement the model can absorb.
Pay the interest. Hold the loan flat.
Annual loan interest paid out of pocket each year. The loan balance stays flat, the cash value compounds underneath it without rate-on-rate drag, and exit timing has the most flexibility. Lowest leverage, lowest risk, requires real annual liquidity.
- Interest paid annually, no compounding loan balance
- Lowest exposure to rising loan rates
- Requires consistent annual cash flow
Pay some. Capitalize the rest.
Partial capitalization — the client pays a portion of annual interest, the rest is added to the loan balance. The loan grows but slowly, the cash value still compounds reliably, and the client retains some flexibility on exit timing.
- Partial out-of-pocket, partial capitalized interest
- Loan balance grows at a managed rate
- Middle ground on liquidity demands and rate exposure
Capitalize fully. Maximum leverage.
All interest capitalized. Zero out-of-pocket cost during the loan years. The loan balance compounds; the policy’s cash value has to outpace the loan rate to deliver the projected net death benefit. Powerful when rates cooperate. Punitive when they don’t.
- Zero annual out-of-pocket during the financed years
- Loan balance compounds at the lender’s rate
- Highest sensitivity to rate moves and cash value performance
Most premium finance illustrations don’t survive a rate shock.
If any of these describe your situation, the right structure stress-tested across realistic scenarios — pay, partially capitalize, or fully capitalize — is the difference between a leveraged legacy and a leveraged liability.
- i. An advisor or carrier illustration has shown you a premium finance structure that “pays for itself” — and you want to know what happens if rates rise.
- ii. You have a multi-million-dollar permanent insurance need and don’t want to liquidate other assets to fund the premium.
- iii. You’ve been quoted full capitalization — no out-of-pocket interest — and aren’t sure whether that’s appropriate for your situation.
- iv. You’re inside an existing premium finance arrangement and the cash value isn’t tracking the original projection.
Model the structure at lifeinsurancemath.com/premium-finance.
The platform models the loan, cash value, total death benefit, and net death benefit year by year across conservative, balanced, and aggressive structures, with rate sensitivity built in. Run the model first; we structure the policy from what the math says, then place it here, by Remain Life Insurance Services, LLC.
Or speak with a Remain advisor directly.