The Funding Process of Premium Financed Life Insurance
The process…
One of the most common complaints we hear about is that the premium financing process takes too long and we completely understand that frustration. Experienced agents in the jumbo case market are used to a prolonged sales cycle. However, every agent should understand the basics of how a life insurance policy is financed because the sales cycle can be almost twice as long. It takes longer than the traditional life insurance sale due to the fact that there is a loan involved. The agent, the insured and their advisors should be aware of the process from the onset in an effort to properly manage expectations. As a full service insurance operation specializing in premium financing, the process requires more checks and balances to finance a policy.
Why does the process take so long?
The premium financing process includes carriers, medical underwriters, lenders, institutional trustees, trust protectors, legal counsel, and agents. The coordination of these parties is a challenge in each and every instance.
Next is the element of change. Change happens on every level…from the carrier to the capital markets (as we are experiencing today) to the insured. Offers change from carriers, carrier positions on premium financing are subject to change without warning, coverage amounts change, beneficiary changes and interest rates changes are all the usual suspects for delaying the funding process. We understand that change is inevitable and that managing and minimizing those changes as well as being proactive in our communication will make for a better experience.
How can agents help?
One of the most effective ways to speed up the process is to write a well thought out and detailed cover letter. Today, carriers are devoted to eliminating layering, incentives, beneficial interest sales, STOLI, IOLI, and fund-and-flip deals. To help our carrier partners in this effort, which we fully support, a one page cover letter explaining the need for the insurance, why it is being financed and its role in the overall estate plan will generally help alleviate their concerns.
Once loan processing has begun, an agent can help expedite the process by being organized and submitting complete, clear and concise documents. Notifying us immediately about changes gives us the time to make necessary revisions to loan documents. Experienced agents know their client’s needs and goals. It is critical to inform Cambridge how we can help achieve those goals. Please feel free to contact us with any questions about what the program has to offer your clients as well as properly submitting your cases for quick and effective processing.
