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Premium Financing for US Army Veterans

Who doesn’t want to get give out millions to their loved ones in inheritance? This thought has probably crossed the minds of elderly U.S. Army veterans. But since not all people are created alike, and income levels and savings do vary, the chance at bequeathing millions to their heirs might seem like a remote possibility for ageing U.S. Army veterans who live solely on state pension.

But a new trend in the insurance industry should flash the neon sign for “HOPE” for U.S. Army veterans. Some sectors in the insurance industry like to call it free life insurance or another kind of insurance product, but it is actually a loan that is payable upon death. It is called premium financing. Sounds incredible? No, it’s true.

Premium financing is what makes it possible for elderly people and high net worth individuals to take out a life insurance policy that is worth millions – all with practically no out-of-pocket expenses from the part of the insured individual. It is the financial institutions, typically the banks, pay the insurance company the premiums of the insured’s life insurance policy. In some cases, insurance companies and insurance brokers loan out the premium financing amount.

For premium financing loans negotiated with the banking institutions, the insured only needs to present a minimum collateral. When the loan is released, the bank then pays the insurance company; it keeps the insurance policy as collateral until the policyholder dies. Upon death, the bank uses the death benefit to pay for the total amount of the loan (principal plus accrued interest). It then gives the balance of the benefit, and gives back the minimum collateral, to the heirs of the deceased.

In some cases, the insured has to pay a monthly bill to the bank to pay for the premium financing loan. If the insured party dies before the loan is fully paid up, the balance of the loan - plus interest - is deducted from the death benefit. The rest of it is transferred 100% to the heirs.

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