Life insurance is a very important aspect of financial planning.  It is wise to “invest” in a life insurance policy.  The main benefit of obtaining life insurance is to make sure that your family members and loved ones who depend on you for support are provided for financially.

We all know the importance of life insurance in Texas, unfortunately today’s economic conditions has made obtaining the security of life insurance more challenging to purchase, regardless if it is term life insurance or whole life insurance.  Many people are living for today vs. preparing for tomorrow.  Life insurance is an intangible asset, so some people can not see the immediate gratification of owning a life insurance policy as they would a car, or home, etc.  Many do not recognize the value of life insurance until it’s too late.  This does not have to be the case.

There exist a mechanism to assist with the affordability of premium insurance which is premium financing.  This can be an effective tool to help those that want to provide for their loved ones but do not want to exhaust their bank accounts or liquidate assets in order to do so.  Premium insurance financing makes sense if you are financing at a lower interest rate than the rate you would expect to earn by liquidating some of your assets.

The interest paid on a loan for financing premium insurance is generally not tax-deductible because the IRS considers this a personal loan.  The loan can only be tax-deductible if it meets one of the following criteria:

• Interest incurred for investment purposes
• Interest for a qualified residence
• Interest for an educational loan
• Interest incurred to fund a trade or business
• Interest from extended payments of estate tax
• Interest used in the computation of income or loss of income from passive activity

Premium financing sources had been very limited until recently.  Several banks and lending institutions now offer financing insurance premium to their clients.  Now there are lender brokers who assist in the financing of insurance premiums.  They are able to provide more flexibility with lending terms that are a better fit for the clients, which is similar to an independent insurance agent.

It is important to keep in mind that many of the leaders will allow a client to finance an insurance premium only if they meet the minimum amount of loan borrowed.  Each lender has a minimum required amount that the client must borrow before the financing application can be completed.  Therefore, most insurance premium financing is for those seeking to purchase a large amount of Texas life insurance.  It’s important to inquire about this with the financing agency before proceeding with the loan request.

As you can see, even though purchasing life insurance may have its challenges, there are options available for those who are looking to protect their loved – ones in the event they are no longer here to provide that protection.  Premium insurance financing is one of the many ways that makes obtaining life insurance attainable.