Tax Efficient Solutions and the Premium Finance Market

Tax Efficient Solutions and the Premium Finance Market

In order to sell premium finance and engage this market in an efficient and effective way, it is vital to have procedures, process and protocols. In our discussions about life insurance, we have found the most common complaints from producers are that they do not understand the process, that cases take a really long time and take a large investment of time. All of these characterizations about the premium finance market are accurate, and in this article we will discuss some of the things that we do at Tax Efficient Solutions that have helped us become one of the most effective agencies in the premium finance market.

Life Insurance continues to remain a sophisticated tool for estate planning purposes. Helping a client plan their estate is simply taking actions to ensure long term financial health and ultimately, stability. Life insurance is essential of any comprehensive estate plan, as it covers the unknown, the unexpected, and the things that possibly can go wrong. Life insurance is a time-tested solution of leveraging assets into dollars needed to pay future taxes so your clients can pass on what they have worked hard to accumulate. It can help high net worth families hedge against risk, too, especially when placed in a trust. Estate tax mitigation is a key element of estate planning. A plan that minimizes tax exposure and maximizes a client’s legacy will make sure that the heirs receive everything that the client has worked hard for. Providing maximum control with tax efficiency provides a smooth conveyance of assets and guarantees the lifestyle and standard of living for the client, their children and their grandchildren. Life insurance held in an irrevocable dynasty trust protects the family’s legacy, in the state of Florida, for 360 years against inheritance taxes throughout multiple generations, protects against divorcing spouses of children, grandchildren, etc., and protects against creditors of the legacy that is left to family members.

Now, let’s delve into the mechanics of our early thought processes with any potential prospect:

  • Not all high net worth clients are good candidates for premium financing.  One of the most important aspects of premium financing is to efficiently pre-qualify the potential prospect. The biggest mistake that we see being made in the marketplace is the failure of producers to efficiently pre-qualify the prospect.  We work with the largest life insurance producers in the U.S. (along with advisors such as CPAs, attorneys and banks) and one of our strongest advantages is that we do not have carrier loyalty. We always choose the carrier that best fits the client and has the best underwriting and numerics. Our relationships with all of the carriers work in favor of our clients. The first thing that we do with a new prospect is have them fill out our customized pre-application. Our informal application allows us to determine whether the client is a potential prospect from a both a medical and financial perspective. We also determine if the client has sufficient liquidity and collateral capabilities.

Next, we have to determine if they’re a prospect in terms of risk tolerance    profile and estate goals.  In order to do that, we set up our first initial meeting with the individual. Typically, during that first meeting, we can assess whether premium financing is suitable for the client, as their needs come before ours.

  • Liquidity is just as important as total net worth.  One of the biggest factors in determining suitability for premium financing is the client’s liquidity.  By stress testing the program, we make the client fully aware of the potential increase to the client’s interest costs and collateral requirements in the future.  We spend a substantial amount of time in the early stages of discussions with a new client to ensure that he or she has the financial liquidity and collateral capabilities to absorb those increased liabilities should they come to pass.


  • The “advisor profile” is just as important as the client profile.  We work in coordination with the clients’ CPAs, bankers, attorneys and other advisors very closely to help guide them along the process. Creating a trusting relationship with all of the aforementioned advisors is a vital step – as all must be onboard and in synergy in order to efficiently close the premium finance case in a concise and crisp matter.


  • Case design, bank options and annual reviews are complex moving parts that require detailed customization.  Seamlessly integrating a client’s premium financing program into their estate plan, and making sure each part of it works to achieve their ultimate legacy goals, is a complex process that is only perfected through experience.  Our experience is important, but it’s our approach that makes us different. We know that no two cases are the same and that the complexity calls for a unique solution. We are the clients’ advocate and use all of our expertise to create and implement the plan that is best for the client and their family. We frequently get opportunities to work with other producers that have clients who purchased premium financed policies that were designed incorrectly, or as a result of poor annual reviews and follow up, have fallen away from their original goals.  Often, we can drastically reduce the client’s current and future liability and get an estate plan back on track.