There are multiple reasons why people invest in premium financing. Here are a few of those reasons
- Reducing the opportunity cost of your funds since your current cash flow may be committed to other expenses.
- Reduces your liquidity needs, especially helpful if your assets are not readily convertible to cash.
- Paying a small portion of the premium via interest (and posting collateral) as opposed to paying the full premium.
- Positive arbitrage between the interest on the loan and the return on the life insurance cash value.
- Gift the interest instead of gifting the principal.
- Protecting your estate utilizing leverage (other peoples money).