Why Use Carrier Acknowledged Programs?
As the premium finance market place has grown and developed over the last five years, there has been a variety of premium finance life insurance programs that have come and gone. From the days of non-recourse premium finance (or stranger owned life insurance)- not requiring an insured to post any collateral or sign a personal guarantee, allowing the premium finance agreement and policy's value to represent the total collateral posted for the loan, to the development of life insurance financing programs that require 100% collateral, much has happened in this burgeoning industry.
Following the end of the stranger owned life insurance or non-recourse premium finance days, most advisors and life insurance financing lenders took from six months to a year off to regroup and recalibrate their programs based on the feedback given by the insurance carriers and self regulating industry organizations. This feedback addressed many of the flaws with the previous premium finance life insurance programs, flaws including illegal rebating, lacking insurable interest, premium finance fraud and the need for consideration or "skin in the game" from the insured. Fortunately, for consumers and agents alike, the majority of the premium finance life insurance lenders made the necessary changes, integrated the suggestions from the carriers and produced compliant, transparent life insurance financing programs.
Unfortunately, as with all industries, there are always individuals and organizations that create programs that that are not in keeping with the suggestions from the carriers' and life insurance financing industry's self regulating organizations. These premium finance life insurance programs have been given names to describe their abusive natures such as STOLI (stranger owned life insurance) or "stealth" premium programs. One may ask how and why would a carrier issue a policy if it were being used in conjunction with a stranger owned life insurance, stealth or unapproved program. This happens because the creators of these programs have been very crafty in their ability to design programs and a premium finance agreement that closely approximate the premium finance programs that have received the carrier's blessing.
Why Use Carrier Accepted Premium Finance Life Insurance Programs?
The far-reaching repercussions of utilizing a life insurance financing lending program that is not carrier accepted and does not have a premium finance agreement that is approved is still not fully known. However, as these "stealth" or stranger owed life insurance programs begin to surface in conjunction with carrier initiated policy rescissions and legal complaints, policy owners will be pleased that they decided to remain clear of these programs and in-turn avoid premium finance fraud.
Great News- There are Many Carrier Accepted Programs
With all of the development of the carrier accepted premium finance life insurance programs utilize a compliant premium finance agreement, the perceived benefits of the "stealth" or stranger owed life insurance programs are so minimal that it is not worth perusing these options as a client. This also means that the new life insurance financing programs have many benefits that create a win-win-win for you, the insurance carriers and the lenders. Additionally, the accelerated growth of the premium finance industry had resulted in the carriers acknowledging the demand for life insurance premium finance solutions and this has led to the entry of many new lenders and client friendly lending programs.
