Premium Financing involves the lending of funds to a
person or company to cover the cost of an
insurance premium. Premium finance loans are often
provided by third party finance entity known as a
Premium Financing Company; however
insurance companies and brokerages occasionally provide
premium financing services.
[1]
To finance a premium, the individual or company requesting insurance must sign a premium finance agreement with the premium finance company. This is a loan contract that lasts for the life of the insurance coverage. The premium finance company then pays the insurance premium and bills the individual or company, usually in monthly installments, for the cost of the loan.
Benefits
There are a number of benefits to financing an insurance premium. [2] These include:
- Eliminates the requirement for a large up-front payment to an insurance company.
- Multiple insurance policies can be attached to a single premium finance contract, allowing for a single payment plan to cover all insurance coverage.
- Premium financing is often transparent to the individual or company insured. Brokers transmit the completed premium finance agreement to the premium finance company, and the insurance holder is billed as they would be for any other typical insurance policy.