Premium Financing In 2025
Each year, Esquire magazine releases a special issue they call The Big Black Book. It is a style manual for men with a discerning eye – connoisseurs of the best luxury products and experiences life has to offer a man with financial means – and it is updated annually. It reviews the newest cutting edge James Bondesque gadgets, must-have wardrobe additions, the sexiest newly released Italian sports cars, and the hottest exotic travel destinations. It encompasses everything an International Man Of Mystery ought to know about what is new & hot each year.
As I thought about Esquire’s The Big Black Book concept, it made me consider updating a book that I originally wrote back in 2021: Premium Financed Life Insurance - The Key To Effect Estate Tax Planning.
With all the changes this industry has undergone in recent years (months even), I have come to realize that in order for any book on this subject matter to be accurate, relevant, and truly educational, it must be continually updated. If I am going to continue to call myself The Most Transparent Premium Financing Intermediary In The Life Insurance Industry, then I had better live up to it, consistently putting out new/updated/relevant content, keeping me on the cutting edge of this industry. That’s what a true leader does.
I always say, “The better you get, the better you better get.”
Many irresponsibly designed premium financing cases – wherein the client either has an absurdly small amount of skin-in-the-game (and in some cases, no financial contributions whatsoever) – are now imploding due to the accelerated compound debt that has come as a result of increased borrowing rates. In these types of premium financing arrangements, Loan-To-Value (LTV) ratios have become less and less healthy, causing clients to post substantially more collateral than they originally expected. The harsh reality is, many of these clients were not truly made aware of the consequence of increasing interest rates, making the entire model unsuitable for certain types of clients.
To see today’s 30-Day Average SOFR rates, go to https://fred.stlouisfed.org/series/SOFR30DAYAVG, and for 1-Year CMT rates, go to https://fred.stlouisfed.org/series/DGS1.
For clients paying interest out-of-pocket, these increased interest rates now require a substantially larger client outlay. For clients that made their decision to enter a premium financing arrangement based on accruing the interest, their debt is compounding at an extremely accelerated rate, potentially outpacing the policy’s cash value growth. If this happens, their Loan-To-Value (LTV) ratio becomes extremely vulnerable to either huge collateral calls (during the time while there is a third-party lender involved), or a policy lapse (after the third-party lender is paid off using a policy withdrawal or policy loan).
It has been my experience that most clients that purchased Premium Financed Life Insurance from these overly aggressive intermediary firms were never truly educated on these types of potential risk factors. This lack of full disclosure and lack of transparency on behalf of the Premium Financing Intermediary is what has given the life insurance industry a bad name.
Conversely, I have built my reputation in this industry as a conservative and transparent educator, not an insurance salesman. I have found that with uber high net worth clients, my approach to premium financing – which is rooted in education and consumer protection – has been a breath of fresh air for them.
Most life insurance agents gloss over the details, and they justify this lack of disclosure and lack of transparency with their mantra “K.I.S.S. – Keep It Simple Stupid.”
My response to hearing this irresponsible justification is, “There is nothing SIMPLE about Premium Financed Life Insurance, STUPID.”
If done properly – with the proper due diligence, stress-testing, and backtesting – Premium Financed Life Insurance is an extremely prudent and efficient tool when it comes to estate planning. Dumbing down the sophistication of this strategy negates the mathematical validity of using responsible leverage, which is why I have committed myself to being an educator and a nationally renowned author on this particular topic in an industry that is severely lacking in this area.
In 2024, I released an updated version of my premium financing book, which was the eleventh book I have authored in my career. Several of my books are currently being distributed in multiple countries including Australia, Brasil, Canada, Croatia, Czechoslovakia, Denmark, India, Italy, Japan, Mexico, New Zealand, Norway, Singapore, Sweden, the United Kingdom, and of course, the United States of America.
I have always said that Premium Financed Life Insurance is not appropriate for everybody. However for the right client – assuming they have the right net worth, understand the power of leverage, and have the intellectual capacity to make sound mathematical decisions – it can be one of the most valuable components in their overall financial portfolio.
If you are a financial advisor, life insurance agent, CPA, estate planning attorney, or a principal in a family office, this book seeks to give you a better understanding of my premium financing methodology, risk analysis process, policy design artistry, and suitability study analysis. This level of full transparency is something that is not only important in premium financing, but it is a pillar of how I do business, as well as how I live my life as a husband, a Christian, and as a man of Samurai decent.
In my premium financing practice, I often provide answers to these questions:
Does premium financing work in a high interest rate environment?
How do you explain the low index crediting rates in carrier illustrations?
How are you dealing with clients that are upset that the combination of high interest rates and low index crediting illustrations are depicting an unfavorable outcome?
What is the future of borrowing interest rates?
Why do clients seem to always get higher-than-expected collateral calls?
Why is it important to have multiple loan models and lending platform designs for different types of clients?
I bluntly and transparently answer these FAQs, as well as address some of the most important issues when a client is considering Premium Financed Life Insurance as a component of their estate plan.
I once heard the head of a large life insurance distribution channel – while speaking to a financial advisor – say, “Sugiyama won’t even sugarcoat a cookie.”
This is absolutely true.
I do my best to communicate respectfully, however I believe in telling everyone the truth about the good, bad, and ugly components of Premium Financed Life Insurance. Imagine that – a premium financier that actually tells the truth.
To access my book Premium Financed Life Insurance on Amazon, CLICK HERE
To access my book IUL For Aspiring Know-It-Alls on Amazon, CLICK HERE
