Have you heard of premium financing? As a successful insurance provider, it is very likely you deal with managing premiums on a daily basis. You may also finance premiums for your policyholders, but are you getting the most out of your premium financing? If you aren’t properly utilizing premium financing to increase your profits, then you are missing out. Here at COST Financial Services, we specialize in facilitating your financing efforts, thus adding an additional service and potential profit center to your insurance services.
Insurance services aren’t generally riveting topics. The insurance industry has been around for a long, long time, so much of the way insurance agents and providers serve their clients and make money has been written in stone already. Yet, that doesn’t mean there isn’t room for innovation. Transform the potential of your insurance services by putting your premium financing endeavors into our hands. Let us explain to you how it works.
How does premium financing fit into your insurance services portfolio?
The act of premium financing simply represents the lending of funds to an individual or entity to pay for insurance premiums. It is typical in the industry that third-party companies, such as ours, facilitate premium financing, the allocation of funds, and the logistical and support frameworks. The actual process of financing a premium involves the entity in question signing a premium financing agreement with the party providing the funding. Premium financing loan agreements are generally written to be repaid in monthly installments, with terms that last for either one year or the life of the loan.
What are the demographics of premium financing?
There is a specific demographic that typically gets involved with premium financing transactions. The median age is between 29 and 75, with a net worth of approximately $5 million or greater. The reason why there is a slight skew towards younger people is that premium financing is now indexed to universal life policies, thus benefiting the younger people who hold those policies. In fact, the primary driver for premium financing programs is life insurance.
The various types of life insurance that utilize premium financing
There are essentially three different types of life insurance that fall under the premium financing category. The first is traditional life insurance, in which the payer pays into the loan with the intention of holding it forever. In these situations, traditional insurance services are supplemented with far more profitable premium financing, which is especially beneficial for those who have a high net worth.
The next insurance service type that would be beneficial in a premium financing scenario are what are referred to as hybrid financing programs. The final type falls under non-recourse financing. In both situations, collateral is held by the payer’s investment team. These premium financing situations aren’t good for payers who have lots of material assets, such as real estate.
Utilizing a premium financing platform
The problem with trying to implement your own premium financing programs, or integrate them within your existing insurance services framework, lies in the complex nature of these agreements. Entities that don’t utilize a premium financing platform or service like ours must hire an attorney who is familiar with premium financing agreements and transaction types. There is a lot of information, paperwork, agreements, and numbers to figure out.
That’s where we come in. At COST Financial Services, we provide a level of consistency and reliability that your insurance business can count on. We know the details regarding state and federal laws, as well as commissions and rebates. Partnering with us to enhance your insurance services helps mitigate risk, saves time, increases efficiency and maximizes profits. If you are looking for enhanced insurance services driven by a comprehensive premium financing program, it’s time to get in touch us!