Premium Financing What is Premium Financing? Premium Financing is a strategy that helps you maintain your current lifestyle in the event of a chronic illness, premature death, or an inability to sufficiently save for retirement. Protecting your earnings is critical to insuring your ability to save for retirement. Due to limitations, traditional retirement plans are typically insufficient for high-income earners. If you want to maintain your lifestyle in retirement, you need a proactive strategy that puts more money toward protecting your future income without putting a drain on your current finances. Premium Financing is the ONLY strategy that uses leverage to help you acquire more of the benefits you need to financially protect you and your family. Its unique fusion of financing and life insurance offers you more protections and the potential to earn more for retirement than you could obtain without leverage. How it Works The Premium Financing strategy is simple. Premiums are jointly funded by bank financing and the participant or employer. The bank financing provides the majority of the total contribution to the plan, and the life insurance policy itself is the full security for the loan. This strategy is specifically designed so that the participant is not required to go through financial underwriting or sign any loan documents. As an additional protection, Premium Financing’s structure is also set up to protect your benefits in the event of employer bankruptcy. By using bank financing, the Premium Financing strategy allows you to realize benefits beyond your expectations while keeping contributions within your means. This concept is not much different than financing a house – you use a mortgage to leverage the assets you have on hand to buy more house than you could afford on your own. Money is borrowed to buy more house, or with Premium Financing, more benefits. With Premium Financing, you are buying a life insurance policy with a larger death benefit, more living benefit protections, and the potential for more cash accumulation without the risk of losses (due to declines in a market index). Business Applications The departure or premature loss of a key executive can significantly affect a company’s bottom line. The Premium Financing Strategy helps provide the additional funding required to address the following business situations effectively: Executive Bonuses Buy/Sell Key Man Partner Buyout Succession Planning Highly Compensated Employee Incentives Why companies choose to use Premium Financing. To Attract the Best, You Need to Offer the Best Attract and Retain Employees by Offering Better Benefits Key employees are the lifeblood of your company and it is crucial to be more attractive than your competitors. Benefits are necessary to recruit and retain your best employees, but most companies offer essentially the same benefits as everyone else. How do you offer more and set yourself apart? Premium Financing is a unique strategy that allows you to achieve a competitive advantage by offering the best benefits, provide more protection, and potentially save more for employees’ retirement. Simply put, the Premium Financing Strategy provides you with the extra funding to set yourself apart without having to increase your budget. More Cost Effective than Traditional Plans The real reason businesses are not offering additional benefits to their key employees is cost. The Premium Financing Strategy uses leverage to help cover the costs of the additional benefits needed to attract top talent. A unique feature of Premium Financing is that there are no loan qualifications or loan documents signed by the employer or employee. The contributions made to the strategy act to fully secure the loan. Utilizing Premium Financing allows companies to spend less on something that would otherwise be a substantial expense. This will ultimately improve your cash flow and decrease costs while offering the differentiation needed to compete for the best employees. In addition, due to the high cost of benefits, businesses also find it difficult to provide adequate coverage for other business liabilities such as Key Person, Buy-Sell Agreements, Succession Planning, etc. These events can typically be funded at half the cost of traditional options with Premium Financing. A Better Way to Fund Contingent Business Liabilities (Key Person, Buy-Sell Agreements, Succession Planning, etc.) Key executives leave for a variety of reasons which can leave a business scrambling to cover their loss. They can become disabled, develop a chronic illness, retire, pass away, or simply leave. Most companies use their cash to grow their business and not to fund contingent business liabilities. Premium Financing helps provide the funding needed to protect your business in a wider variety of circumstances. A Better Way to Informally Fund Deferred Compensation Premium Financing is a superior way to informally fund Non-Qualified Deferred Compensation. By financing a life insurance policy as opposed to traditional investment alternatives, you get the added advantage of additional cash through the use of leverage, potential tax-deferred growth, protection benefits should something happen to the employee all without downside market risk. Set an Appointment Common Problems Companies Face Today Retain Key Employees, Protect Your Business, and Save Money Common Problems Companies Face Today Recruiting and retaining key employees is of extreme importance to most businesses. Likewise, having proactive plans that deal with partner, owner, co-founder or family buy-outs are equally critical. The problem is that people leave for a host of reasons: they get sick, retire, pass away, or move to another firm. It is difficult to cover all of these possible events. Even worse, funding all these contingent liabilities is an expensive ongoing cost, so most simply don’t. This leaves companies exposed. Premium Financing offers both a plan that can cover all these situations as well as bring the extra cash flow needed to fund them more effectively. Recruit and Retain Key Employees Employees don’t stay at companies for 20+ years anymore and the competitive nature of headhunting has recruiters coming at your top talent from all directions. While most companies understand the need for competitive benefits packages in order to retain key employees, they are not able to provide everything at once without having to make significant financial sacrifices. It is crucial that your employees’ basic needs are not only met but exceeded in order to differentiate your company. Studies have shown that it costs as much as 30% of an employee’s base salary to recruit and train a new executive. Wouldn’t you rather use that money to benefit the executive and motivate them to stay? For more information about your employee’s top financial fears. Click Here! Premium Financing makes it easier to address these concerns with five planned contributions and a policy that has the potential to grow over time. Business Continuation (Key Man, Buy-Sell, Partner Buyout) Key employees leave for a variety of reasons. Partners can become disabled, have a chronic illness or just want to retire, leaving the business to scramble to cover their loss to the business. Most life insurance requires that someone dies while they are employed for the company to recover its costs, but the Premium Financing Plan is one of the few that covers key personnel if they leave. In the case of business ownership, most partners would like to have something in place that would avoid having a large portion of the company passed on to a family member or someone who has no personal stake in the company. Cost Effectiveness of Traditional Plans Most benefits require that you pay an annual expense as long as the employee stays at your company. Even worse, this cost increases over time. With Premium Financing, there are five or less payments to be made. Most businesses offer just the basic benefits, like health insurance and 401K matching. So what separates you from the rest? Contact us, so we can tailor a Premium Financing Plan for your business. Set an Appointment Self Funded vs. Premium Financing Compare Premium Financing to What You Could Afford Using Your Own Money This concept is not much different than financing a house – you use a mortgage to leverage the assets you have on hand to buy more house than you could afford on your own. Money is borrowed to buy more house, or with Premium Financing, more benefits. With Premium Financing, you are buying a life insurance policy with a larger death benefit, more living benefit protections, and the potential for more cash accumulation without the risk of losses (due to declines in a market index). As you can see from the chart on the left, the addition of bank funding gives you the potential to significantly enhance the funds available for benefits. Example: Self Funded vs. Premium Financing Book Your Own Appointment, Click Here!