What is a key feature of 'premium financing'?

Premium financing is a financial strategy that allows policyholders to borrow funds to pay their insurance premiums, especially for significant life insurance policies. This is particularly useful for individuals who may want to maintain liquidity or invest their capital elsewhere while still ensuring they have the coverage in place.

By enabling the policyholder to obtain a loan to cover premium costs, premium financing makes higher-value policies accessible without requiring the policyholder to liquidate assets or deplete their cash reserves. This can be an attractive way to leverage funds for those looking to maximize their investment potential while still maintaining life insurance coverage.

The other options do not capture the essence of premium financing properly. While it might be more commonly utilized by those with substantial financial resources, it is not limited to high-income earners. It also does not involve policyholders paying premiums directly, nor does it necessitate prepayment for all insurance policies, as the nature of premium financing revolves around leveraging another source of funds to manage premium cash flow.