Client
Contributes capital, pays interest and bears collateral-call and repayment obligations.
Premium financing
Financing can reduce initial cash deployed while bringing interest-rate, collateral, currency and renewal risks into the policy structure. Understand the structure, then stress-test it.
Basic structure
What the client, lender and insurer each do.
Lender
Extends credit based on the client, collateral and policy value, subject to LTV terms.
Insurer
Provides protection and cash value under the policy contract; it does not guarantee loan renewal.
Four paths
Match complexity before chasing the lowest rate.
All cash
Avoids financing-rate and collateral-call risk while retaining opportunity-cost considerations.
Commercial bank
Fits established banking relationships and standard structures; review renewal and margin terms.
Digital wealth platform
May standardise the process; review the platform role, partner lenders and refinancing boundaries.
Private bank
May integrate broader collateral; review cross-collateralisation, relationship balances and concentration.
Stress test
Start with interest cash flow before discussing leverage efficiency.
Interactive tool
Premium-financing stress test
Start with client capital, debt and interest before discussing leverage efficiency.
Client capital$350,000
Loan amount$650,000
Estimated annual interest$29,250
After a 2-point increase$42,250@ 6.5%
This shows first-year interest cash flow only. It excludes charges, currency, repayment, policy value, compounding and collateral calls.
Red lines
These conditions should trigger a redesign.
1
The structure works only with persistently low rates and high illustrated crediting
2
There are no formal facility terms, only a verbal indicative rate
3
The client cannot absorb a two-point or larger rate increase
4
There is no capacity to meet collateral calls after policy or asset declines
5
Loan currency and family cash-flow currency are mismatched and unmanaged
6
A non-guaranteed crediting assumption minus the loan rate is described as risk-free arbitrage