At some point, successful people and business owners run into a familiar situation.
Life insurance becomes important. The amount needed is meaningful. But the money to pay for it is already doing something useful elsewhere.
Maybe it’s invested in a growing business.
Maybe it’s tied up in real estate or private opportunities.
Maybe there’s strong cash flow, but every dollar already has a purpose.
That’s usually when Premium Financing enters the conversation.
Premium Financing allows large life insurance coverage to be put in place without pulling money away from investments or slowing down momentum. Instead of writing large premium checks, a bank funds the premiums while capital stays where it’s already working.
What Premium Financing Actually Is
Stripped down, Premium Financing is a borrowing strategy.
A lender pays the premiums on a life insurance policy.
The client pays interest on that loan and provides collateral.
The policy does what it’s designed to do: protect people, businesses, and estates.
In most cases, the policy is owned by a trust or a business.
That depends on whether the goal is.
It’s not about complexity for complexity’s sake. It’s about using leverage thoughtfully when writing large checks doesn’t feel like the best move.
Why People Use Premium Financing
Most people who use Premium Financing aren’t doing it because they can’t afford the premiums.
They’re doing it because paying them outright may not be the smartest use of capital.
This strategy often comes up when:
Assets are illiquid or highly appreciated
Cash flow is being reinvested for growth
A business needs a large amount of coverage quickly
A family wants estate liquidity without large taxable gifts
Selling investments would create unnecessary taxes
In many cases, borrowing at a lower rate allows capital to stay invested where it’s already performing. The insurance gets put in place, and the rest of the financial picture stays intact.
That’s the appeal. It keeps wealth moving.
How Premium Financing Works
Most Premium Financing plans follow a similar structure.
A trust or business owns the policy.
A specialized lender is selected.
The lender pays the annual premium.
The policy’s cash value becomes part of the collateral.
Additional collateral may be added if needed.
Interest is paid annually or structured into the plan.
Eventually, the loan is repaid using policy values, outside assets, or the death benefit.
That’s the high-level version, but it’s exactly how these strategies are designed in practice.
Where This Shows Up in the Real World
Premium Financing is commonly used in a few key situations.
Growing businesses
A company needs significant key person coverage but prefers to keep cash focused on expansion.
Estate planning
Families want liquidity for estate taxes without making large upfront gifts.
Buy-sell agreements
Multiple owners need coverage without pulling money out of the business.
Executive benefit planning
Life insurance becomes a retention tool, funded without disrupting operations.
In each case, the goal is the same: protection without disruption.
A Simple Example
Consider a growing technology company that needed a $10 million policy on a key executive. The annual premium was over $450,000. Writing that check didn’t make sense while the company was aggressively reinvesting in growth.
By financing the premiums instead, the company secured the coverage it needed while keeping capital focused on expansion. Even as the loan balance grew, the interest cost remained far lower than paying premiums directly.
The business stayed protected, and growth stayed on track.
This Isn’t a “Set It and Forget It” Strategy
Premium Financing can be powerful, but it needs to be managed correctly.
Interest rates change.
Policy values fluctuate.
Collateral requirements can shift.
Lender strength matters.
A clear exit strategy is essential from day one.
Those realities aren’t hidden. They’re part of the conversation from the start.
Premium Financing can feel complex the first time through. Our role is to help guide the process, coordinate the moving pieces, and make sure the strategy is designed and managed properly. If you have a client where Premium Financing might be a fit, we’re happy to walk through the case together and support you from design to implementation. Tracking Number 8719002.1
Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. True Wealth Strategies LLC is not an affiliate or subsidiary of Guardian. CA Insurance License # 4205864.
Producer use only. Not for use with, or distribution to, the general public.
