Self-Pay & Premium Finance
Self-pay (using your own liquidity)
Self-pay tends to make more sense when:
Liquidity is abundant and underutilized
Capital is sitting in low-yield assets (cash, T-bills, money markets)
Investor prefers simplicity and certainty
Estate plan does not require leverage efficiency
Risk tolerance is lower
Advantages
- No interest-rate risk
- No collateral calls
- No lender counter party risk
- Cleaner structure (especially for international families)
- Higher certainty of outcome
- Often better IRR when opportunity cost is low
Premium Finance
Premium finance allows clients to acquire substantial life insurance coverage without committing significant personal or business liquidity. The life insurance policy is utilized as collateral to secure financing for premium payments.
Financing may be obtained through GSP-affiliated lending institutions or through an existing private banking relationship.
This structure may allow clients to:
Finance up to 100% of required premiums
Preserve capital for alternative investments or operating needs
Benefit from potential positive arbitrage between loan costs and policy crediting rates
Acquire life, liquidity, or growth-oriented insurance assets using borrowed capital
Advantages
- Preserves deployable capital
- Allows insurance to be funded with borrowed dollars
- Can materially improve capital efficiency
- Often attractive for global families seeking USD-based guarantees
- Keeps liquidity available for:
- Business expansion
- Opportunistic investments
- Family needs
Trade-offs
- Interest-rate risk
- Collateral management
- Requires governance, monitoring, and stress testing
- Poorly structured plans could fail under rate shocks
SUITABILITY CONSIDERATIONS
Premium finance may be appropriate for individuals with a minimum net worth of USD $10 million who seek insurance-based solutions to address future liquidity requirements and facilitate asset transfer.
Suitability is determined by multiple factors, including insurance objectives, financing terms, policy performance assumptions, interest rates, and available alternative planning strategies.
Positive Arbitrage in Premium Finance
A central component of any premium finance strategy is the potential to benefit from a favorable spread between the loan interest rate and the rate at which policy values accumulate. This differential, commonly referred to as positive arbitrage, is a key analytical consideration in strategy design.
ROLE OF LIFE INSURANCE IN STRATEGIC PLANNING
Life insurance serves as a foundational element of comprehensive wealth planning by providing liquidity, stability, and risk mitigation. When properly structured, it supports wealth preservation, accumulation, liquidity planning, and efficient intergenerational transfer.
Life insurance must be evaluated within the context of the client’s broader financial, estate, and succession plan.
CASH VALUE ACCUMULATION
Policy cash values may accumulate on a tax-deferred basis and may be accessed during the insured’s lifetime through tax-advantaged distributions, subject to policy terms. Alternatively, values may be allowed to compound over time within a tax-efficient environment.
ESTATE AND SUCCESSION PLANNING
These strategies are suitable for individuals seeking substantial life insurance coverage for business continuity, estate liquidity, or tax planning purposes, while preserving personal and corporate capital for reinvestment.