Underwriting

Why CPS/Integrated Marketing?

CPS/Integrated Marketing works closely with the Trusted Advisor to underwrite and execute premium finance transactions. Our value proposition is a one-stop-shopping experience. Since all premium finance transactions involve issuing a life insurance policy our Single Source Capability eliminates the need to use multiple parties to execute each step of the process. CPS/Integrated Marketing has the staff, experience and expertise to underwrite the insurance and simultaneously obtain the financing for the policy. CPS/Integrated Marketing works directly with carriers to underwrite and issue the policy, and with institutional lenders to obtain the loan. Our transactions are streamlined and executed timely and efficiently.

Premium Financing Overview

Life Insurance Premium Financing allows high net worth individuals an efficient way to finance sizable life insurance premiums. Rather than using investable assets to pay the premiums the borrower is able to retain current high yielding assets and have them readily available for future investments.

In recent years, premium financing has evolved into a “must have” strategy for Trusted Advisors operating in the high net worth individual (HNWI) market. This tool enables the HNWI to purchase the appropriate amount of life insurance, maintain their current investment portfolio, and more easily execute wealth transfer strategies. The intrinsic efficiency of a premium finance transaction often times allows another substantial benefit; the client can obtain the coverage needed and not settle for a reduced amount due to premium concerns.

Premium financing lets HNWI clients finance premium payments with little or no out-of-pocket costs. Additionally, it allows them to utilize “other people’s money” (OPM) to execute this strategy and eliminate the need to liquidate high-yielding assets. Using OPM can be accomplished by using existing life insurance policies and/or other assets as collateral. The use of OPM is a strategy used by HNWIs to purchase large ticket assets.

CPS/Integrated Marketing partners with a number of qualified institutional lenders to execute these strategies on behalf of the trusted advisor. Our extensive life insurance experience, proven track record, seamless execution and superior service lets CPS/Integrated Marketing stand out from our competition. We put our deep understanding of the marketplace and documented history of success to work for you in designing and executing complex solutions.

Prospects

The characteristics of a premium financing prospects are:

Net worth in excess of $5 million
Large estate holder wishing to leave a legacy
Significant insurance needs seeking to financing with little or no out of pocket costs
Unwilling to liquidate assets to make policy payments
Estate Tax Uncertainty
Hedges insurability
Generally in good heath

Traditional requirements are:

A recourse loan used to finance premiums
Personal guarantees from the borrowers
Additional collateral, in excess of the cash value of the policy
Annual collateral reviews

CPS/IMIS takes the important step of carefully screening each institutional lender to make sure their programs are in line with carrier requirements. We personally interview each (lender?) to verify the specifics of the program offered. We work closely with the trusted advisor to efficiently place and fund the policy, ensuring a smooth transaction.

A list of carriers currently accepting financing from the programs above can be obtained by contacting CPS/Integrated Marketing

Most programs allow start up fees and expenses to be amortized into the loan

How is a life insurance policy financed?
Life insurance premium financing programs allow individuals who have a need for life insurance to acquire the insurance with little or no out of pocket expense by financing the premiums. In some financing programs, the borrower can capitalize all costs and interest expense. The term of the loan may vary from two-five years or for the life of the policy. Interest rates on the loans vary, depending on the financing structure and the collateral posted to secure the loan. Most loans are either Prime or LIBOR based. The underlying policy is the primary source of collateral. In addition, many programs require secondary collateral equal to 25% of the total loan.

How do I benefit from this program?
Financing your Life Insurance Policy enables you to acquire the amount of insurance you determine necessary to meet your objectives. Without impacting cash flow or liquidating assets, you can take full advantage of life insurance amounts that achieve your estate tax and wealth transference objectives. At the end of the loan term, a number of exit strategies exist based on your estate planning needs at that time. You can refinance the loan, you can pay off the loan and retain the insurance assuming responsibility for all future premium payments, or you can explore the settlement market. Each of these options should be evaluated based on suitability as it relates to your specific needs at that time.

How do my beneficiaries benefit?
If death occurs during the loan period, the beneficiaries receive the net death proceeds after paying off the total loan balance and any other expenses as spelled out in the contract. For example, assume the premium is $500,000 per year and death occurs during the second year on a $5 million policy. The net proceeds would be $5 million minus two years of premium ($1,000,000), minus interest expense and fees of another $100,000. The face amount of the policy, minus premium payments and fees would provide a total net death benefit of $3,900,000. (These are approximations for illustrative purposes only.) The beneficiaries will benefit by receiving a larger part of the gross estate. Financing also may allow for a larger beneficiary benefit by allowing the insured to finance their premiums and potentially acquire more life insurance coverage.

What is the profile of the typical client for this program?
To qualify, you must have a legitimate need for life insurance, have a net worth of at least $5,000,000 and be in generally good health.

For additional information please contact the Premium Finance Department at CPS/Integrated Marketing & Insurance Services by phone or e-mail at:

Ed Jones – 800-776-4647 x 311 or 858-220-7311
ejones@cpsinsurance.com