$10 Million in Whole Life Insurance (Without A Dollar Out of Pocket): How Premium Financing Can Transform Your Fortune

by BetterWealth

Wealthy people love debt.

It’s a fact that might seem counterintuitive at first…

Most of us assume that if you’ve got the money to pay for something, then it’s best to just pay for it without going into debt. And that’s sound thinking for most Main Street investors.

But that’s not always the best financial decision for wealthier investors due to two key factors: opportunity cost and liquidity…

After all, why spend money if you can invest it instead? Especially if the return you’re getting on your investment is higher than the cost you’ll pay for borrowing that amount?

For example, if you’ve got a stock account that’s earning a steady 10% per year, and you’ve got the chance to finance your next car at 5% instead of buying, then why buy?

Buying outright might be slightly safer in the long run, but it comes with with a cost (that lost 5% return).

Now ratchet the scale up from tens of thousands to tens of millions, and you can appreciate the scale of the opportunity cost involved. Financial arbitrage (or the practice of using low-cost debt while investing in higher-return assets) is practically a way of life for wealthier investors.

There’s also a philosophical shift at play: wealthy individuals often prioritize control over ownership.

By keeping assets in play, they retain optionality — something that becomes more valuable as complexity increases. Debt, in this context, isn’t a burden. It’s a way to keep capital moving without sacrificing strategic positioning.s

Moreover, many types investments can be highly illiquid. Many of the wealthiest Americans have a large portion of their wealth tied up in illiquid assets. Hence why it’s often so difficult to get an accurate picture of a billionaire’s net worth.

By their very nature, these types of assets are hard to sell off without taking a steep discount. This lack of overall liquidity only amplifies the opportunity cost and makes spending that much less attractive.

So instead of selling off these assets, high-net-worth individuals will often use them as collateral for secured loans.

This isn’t just about buying supercars or boats or mansions, either. Because they’ll often leverage the power of debt as a strategic tool to radically transform their assets and prepare for the future.

Now let’s look at how this plays out in the real world…

Ellen’s story brings together all the key reasons wealthy individuals favor leverage: control, timing, asset optimization, and legacy planning.

Ellen was the founder and CEO of a legal services business that worked with dozens of major law firms. She’d started out small in the early 90s, providing temporary paralegal services to firms overwhelmed by their caseload. Over time, she built a network of legal experts, consultants and technicians in major Northeastern cities like New York, Boston and Philadelphia.

By age 65, she’d built up an estate worth an estimated $20 million — with most of it tied up in her business.

She knew that she was well above the $13.99 million estate tax threshold … meaning every dollar over that amount would be taxed at a rate of between 18% and 40% unless she did something about it.

In most jurisdictions, the death benefit of life insurance is exempt from estate tax considerations. This cash benefit is tax-free and paid out within 15-60 days of the passing of the insured, giving their beneficiaries some much-needed liquidity during a difficult financial time.

Ellen wanted to fund a $10 million whole life insurance policy to optimize her estate, minimize the impact of taxes, and maximize the resulting liquidity. But she wasn’t yet ready to walk away from her business.

So she turned to a strategy called “premium financing” to fund her policy…

With premium financing, a third-party lender steps in to make your premium payments for you based on a specific lending agreement.

Premium financing loans can be secured by relatively illiquid assets, and can be structured to fund your life insurance’s premium payments for years to come (even for the rest of your life).

In Ellen’s case, the loan was secured against the value of her business, and the lender paid her premiums for several years. During that time, she was able to fund $10 million in whole life insurance without spending a single dollar of her own money.

Of course, there’s a calculated risk involved in every lending agreement.

Even with her nominal interest rate, Ellen ended up paying a small fortune in interest against her substantial loan. But even with the cost of borrowing, the policy’s internal growth, coupled with the tax savings on her estate and the sale of her business, left her substantially ahead. What she paid in interest was ultimately dwarfed by what she preserved in untaxed legacy.

But the key advantage of her premium financing agreement was that she didn’t have to sell her business. And that business kept growing … until she received a premium buyout offer that boosted her overall net worth by nearly 30%. She took the offer, paid off her premium financing agreement, and starting adding paid-up additions to grow her whole life insurance policy even more.

This advantage doesn’t just apply to private businesses, either. Premium financing can be a practical choice for anyone who has a large portion of their net worth tied up in commercial property, art, alternative assets or even cryptocurrencies like bitcoin.

Premium financing can allow you to dramatically re-configure your assets without needing to immediately liquidate or risk losing years of hard work.

For the ultra-wealthy, debt isn’t a sign of distress. It’s a strategic lever — used not just to spend more, but to build smarter.

When paired with tools like whole life insurance, premium financing becomes more than a workaround. It becomes a way to write your own rules … on your own timeline.

Key Takeaways

  • Wealthy individuals often use leverage and premium financing strategies to optimize liquidity and control without liquidating valuable assets.
  • Premium financing allows funding large whole life insurance policies, preserving wealth and providing estate tax advantages without out-of-pocket premium payments.
  • Whole life insurance death benefits are typically exempt from estate taxes, offering tax-free liquidity to beneficiaries when it is needed most.
  • Strategic use of low-cost debt paired with higher-return investments maximizes opportunity cost benefits for high-net-worth investors.
  • Retaining illiquid assets like private businesses or alternative investments and using them as collateral helps maintain long-term growth and legacy planning flexibility.
  • Debt is viewed by wealthy investors as a strategic tool to maintain asset optionality, maximize growth, protect legacy, and optimize timing for liquidity events.

Ready to see how this could apply to your wealth plan? Click the big yellow Clarity Call button and let’s map it out together.