Selling life insurance premium financing can be a lucrative business for producers. But since premium financing isn’t the best fit for everyone — indeed, it’s a strategy that tends to be useful only for high net worth individuals, who would rather not liquidate their assets in order to pay for their life insurance premiums — it can be a tricky business to navigate.

The primary challenges are two-fold:

• How do you get in front of qualified prospects?

• How do you close more cases?
  

Keep reading for some solutions to these challenges as well as some tips for growing your premium financing life insurance business this year.

Understand Your Ideal Prospect

Premium financing is a better way to buy a policy for clients that can afford that premium. Hence, the ideal client is someone who has substantial net worth — some carriers observe a minimum of $3 million or $5 million in net worth, but a more ideal client is at a level of $10 million or above. These prospects, as higher earners, are likely to be doctors, attorneys, professional athletes, and so forth. Real estate developers can also be great prospects as they understand the concept of leverage.

Use Referring Centers of Influence

As an advisor and top producer, your centers of influence (COIs) are the key to finding ideal prospects. These may include private equity firms, CPAs, attorneys, trust underwriters, estate planning professionals, or other insurance and financial services professionals. Reach out to these professionals and establish a relationship whereby you refer clients to each other.

Refine Your Positioning

With 26 years of experience in the financial services and insurance industries, Tim Whitmore started his career as a registered rep, and worked his way up to being the chief marketing officer with Life & Annuity Masters. He remains a top producer today as well as an extremely successful coach who works with RIAs, planners, and top-level life and annuity producers.

As Tim puts it, “It’s all in how you position it.” In other words, what do you say to get the client interested? As Tim explains, simply listing your function as an advisor won’t make a person interested. However, if you can demonstrate that you work with high net worth people like them — highlighting that you can help them get tax-free income in their retirement, a major concern for people in this demographic — you’ll get their attention. Furthermore, if you’re presenting a case with $50,000 or more in annual premium, you should propose premium financing if that client qualifies.

Know Your Estate Planning Scenarios

In order to make the benefits of premium financing more real to your prospects, you should come prepared with plenty of real-life scenarios you can share as stories. Tim often relates to his clients the story of an 82-year-old client and corresponding case with $437,000 in premium. Upon the premium financing handling of the case, her kids netted $12 million and were able to keep the family business despite a significant estate tax issue the family was facing. Without the premium financing handling, the client would have had a very high out-of-pocket payment. Instead, the client paid nothing for the policy the first year. If she had made a first-year payment, it would have only been equivalent to the interest rate of the total premium amount.

“Knowing stories like these not only gives prospects more confidence but also helps producers map out premium financing scenarios that can have a major positive impact for their clients,” Tim says.

Take A Team Approach

Successful agents and advisors who operate in the high net worth arena find it important to have a team in place. One person can’t know everything, and that’s where having an ecosystem, so to speak, comes in. Your team may be comprised of:

• Law firms that are experts in estate planning

• CPAs

• Experts on defined benefits qualified plans

• Professionals in other segments of the industry
  

Not only can you refer business to each other, but you can also put your heads together to ensure your premium financing clients are being well cared for with the best possible solution.

Be Prepared to Handle Objections

Given how relatively new and uncommon premium financing life insurance is, producers should be prepared to handle the most common objections:

• “It’s a gimmick.” With the staggering numbers of premium financing business that major banks are currently doing with major carriers, it’s obvious this up-and-coming strategy is the real deal, which makes this objection easy to counteract.
  

• “What happens if interest rates go up?” Indeed, this is a topic worthy of discussion. Rates going up does pose a risk. This makes it important to understand current rate trends as well as the proper handlings to manage risk to make sure you’re delivering a solution that best suits clients and does right by them.

• “What if the policy doesn’t perform?” This again is a possibility — and so is a bear market. At the same time, life insurance premium financing cases are long-term. Study up on specific solutions such as equity index products as well as historical numbers on policy performance to keep yourself in the know.

• “What are the risks?” As an advisor, it’s important to present all scenarios to clients including the risk of rates skyrocketing for an extended period of time with the policy returning nothing. Clients need to have their questions answered, and they need to understand their risk.

Know the Process

A lot of moving parts go into premium financing life insurance. These include: 

• Proper design of a case that actually reflects the client’s financials

• Doing “stress testing” and running illustrations before submission

• Having all documentation in proper order for submitting to both carrier and bank

• Obtaining a loan approval and a carrier approval leading to the final close

• Potential input from attorneys, especially on statements referring to collateral

• Annual reviews with documents exchanged with the bank with the possibility of modifications

All important points must be discussed with clients upfront — including collateral, for example — as clients don't like surprises during the complex processes involved with premium financing.

Find and Close More Premium Financing Clients

Just as with writing any type of business, building up premium financing clients takes time and persistence. By locating the ideal client and following the tips above, the path to expanding your life insurance premium business can be substantially easier.

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