LIFE INSURANCE PREMIUM FINANCING

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1 LIFE INSURANCE PREMIUM FINANCING A TEST OF WITS, SKILL & PLANNING FINANCED! H OW FA ST CAN YO U FINANCE YO U R?!

2 11 THE ON FINANCING YOUR WHAT YOU NEED TO GET IT ALL STARTED: If you ve never financed a life insurance policy before, it may seem like a complex and, perhaps, confusing process. So we ve created this light-hearted, informative guide to help you understand how simple and logical the process really is. It gives you a day-by-day illustration of how loans get funded at FIRST Insurance; all-to-common pitfalls and how to easily avoid them; and invaluable smart tips from brokers and producers who ve already successfully financed with us. Spend just a few moments with this guide and you ll receive all the information, tools and insight you need to ensure your financing goes as smoothly and quickly as possible. Individual: A personal financial statement A complete tax return Signed credit application Brokerage statements to verify net worth Corporation Partnership, LLC: Two years complete corporate financials Two years complete corporate tax returns Signed credit application If client has a high concentration of net worth in a privately held company, also see requirements for Corporation. COLLATERAL IS KEY: A SIMPLE COVER LETTER GOES A LONG WAY! Financing life insurance is different from other premium financing because each loan is tailored to the borrower s particular situation. For this reason, the best tool you can provide us with is a complete, well-organized cover letter. As you ll see in the following time line, our approval process involves multiple steps and departments. Your cover letter gives everyone involved a valuable snapshot of the loan strategy. Know that full disclosure of every element is necessary for us to make business, credit and legal decisions and is key to a smooth approval process. Your cover letter should include the following information: Desired structure (advance, arrears or deferred) Participants to the deal (i.e., borrower, owner, guarantor, beneficiary) Collateral to be pledged (if applicable) Client s estate planning strategy Collateral was voted by our team as the element Most likely to bring a loan approval to a halt. Luckily, there s a lot you can do to keep collateral from becoming an obstacle. Most importantly, don t put off discussing collateral with your client a mistake some first-timers make. When you submit your loan, know the borrower, guarantor and holder of collateral. This lets us start the detailed process of collateralizing the assets necessary to secure the loan. Avoid changes to collateral after underwriting. Why? No matter how far along your loan is, the new collateral and all supporting documents will have to be resubmitted for Credit Department approval. Additionally, if collateral changes are made after loan docs have been drawn up, the loan must also go back through our Legal Department for document revisions. So close...yet so far. There are three things to remember that will save you time and headaches: If pledging a letter of credit, it must be from a FIRST approved bank. If a CD is pledged it must be from an FDIC insured bank. If pledging collateral from a brokerage house, find out whether it is one of the over 0 brokerage houses that already have approved control agreements with FIRST Insurance.

3 START THE GAME OF LIFE INSURANCE PREMIUM FINANCING P/B does not provide complete 1 2 loan STILL. package. Go get all Loan required STANDS items for submission. DAY - Credit Department underwrites financials. DAY If Credit Department approves case, AM s offer letter to P/B outlining collateral, rates and specifying any new docs required for funding. AM follows up to review key points. If case is not approved go back to Day 2. AM contacts P/B to explain case issues and develop new solution. Borrower requests change to case design ANY TIME after underwriting! GO BACK TO DAY and resubmit to Credit Department DAY 1 Producer/Broker (P/B) forwards completed credit application and financial information from First Insurance Funding. DAY 2 Account Manager (AM) reviews information and sets up call with P/B to review case in detail. DAY AM runs loan performance schedule and writes up design strategy and financial support for case. Forwards to Credit Department for financial underwriting. 10 DAY -11 P/B obtains borrower s signature and any new requested documents and returns to First Insurance. P/B confirms borrower s collateral. Collateral still not confirmed. Loan documents cannot be prepared. Loan STANDS STILL. Go back and put all collateral in place DAY 12 P/B returns signed offer letter to First Insurance. AM prepares case for Legal Department review DAY 1-20 Upon receipt of executed legal documents, First Insurance -Obtains signed policy assignment from carrier(s) -Secures any required collateral DAY 1-1 Legal Department reviews, approves, and preps final loan documents DAY 21 First Insurance wires premium payment to carrier. Borrower requests changes to final loan documents. GO BACK TO DAY 12 for First Insurance Legal Department review. DAY 1-1 Documents are ed to P/B for borrower to review. P/B obtains signatures for legal documents and, if applicable, interest check. FINANCED

4 SURE-FIRE WAYS TO STOP A IN ITS TRACKS TIPS TO SMOOTHER, SMARTER FUNDING 1 2 Not providing complete signed and dated tax returns and financial statements will STOP the underwriting process in its tracks! Believe it or not, the majority of loan packages we receive are incomplete! Once you submit the initial package, any change made to the illustration, borrower, collateral or interest is like flying during the holidays DELAYS, DELAYS, DELAYS! Trust, by-laws and articles of incorporation are essential for putting legal documents together. Without them, your case is going NOWHERE FAST. Before we can fund, we must have the original interest check from a counterparty and/or original letter of credit. It s simple to overlook and without it everybody is WAITING. Index Do you know who will provide the guaranty? If we don t have it, we have to WAIT until we get it. So close, yet so far. Too often, a failure to carefully examine the final conditions to funding, and fulfilling those conditions, STOPS us from paying the premium. If collateral is not approved and in place by the time your case gets to our legal department, loan documents cannot be prepared. Can you spell D-E-L-A-Y? policies should be illustrated at the guranteed rate with current cost of insurance 1 2 It s never too early to CONFIRM COLLATERAL. The longer you wait, the more chance of it becoming a sticking point later on. SUBMIT TRUST AND/OR FORMATION DOCUMENTS (for corporations, partnerships, LLCs) as soon as possible to ensure they have the ability to borrow and/or pledge collateral. Get a JUMP-START on COLLATERAL APPROVAL. If being pledged from a brokerage account or bank, make sure they will accept FIRST Insurance s control agreement. We ll provide you with a sample for review. PROVIDE CONTACT INFORMATION for collateral holder at brokerage house/bank to help ensure a swift, smooth finish. MAKE SURE every tax return and financial statement is SIGNED AND DATED in the initial loan package. It s one of the most common mistakes we see! GO OVER THE DETAILS of the commitment letter thoroughly and call your AM if there are any conditions you are not clear on. If you don t understand the details, it can be a stumbling block for your clients and their advisors. REMIND YOUR CLIENT that the rate quoted in the offer letter is only a SAMPLE RATE. The APR is locked in when loan docs are issued. MAKE SURE TO RETURN with final documents, PREMIUM FINANCE ILLUSTRATION AND CARRIER ILLUSTRATIONS signed by your client. We cannot fund until we receive both. You must obtain a PRINT OUT SCREEN from the brokerage house SHOWING FIRST INSURANCE AS THE ASSIGNEE in order to fund. To ensure this doesn t hold things up, inform the brokerage house in advance that this will be needed ASAP. YOU'RE FUNDED!

5 Contacts MARK STORMS, CLU Vice President, Eastern Region () PATRICE LOUIS Director of Business Development, Midwest Region () -22 Legend FINANCED! Michael TBD Moore Mark Storms Patrice Louis