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Insurance Premium FinancingLike a bank an Insurance Premium Finance Company is in the business of providing loans to consumers. However, unlike a traditional bank, the Insurance Premium Finance Company provides a very specialized and specific type of loan. Funds are loaned to an insured party to cover the cost of general (non life and health) insurance premiums.Insurance Premiums for both commercial and personal policies can be financed. In either situation the financing mechanism helps to alleviate the need for large up front capital costs normally associated with insurance premiums. Financing insurance premiums is, in most instances, based upon a traditional 12 month policy, however there are situations where financing premiums over a shorter term is necessary. Once a loan is established (booked) the Premium Finance company provides payment in full to the insurance company who issued the policy. In turn the consumer pays the Premium Finance Company on a monthly, quarterly, or semi-annual basis - these payments include any fees and/or finance charges associated with the loan. The Premium Finance Company is given "power-of-attorney" upon entering into a finance agreement. This affords the finance company the right to cancel the insurance contract in the event of non-payment by the insured. The unearned portion of the insurance premium is also assigned to the Finance Company in the event of a return premium. This gives the Finance company security (collateral) in the loan and helps to ensure repayment in the event of a default. Using the insurance policy as collateral is very similar to a consumer using his or her new vehicle as the collateral for the loan. The above is meant to provide the reader with a brief outline of insurance premium finance. For more in depth information and to determine if financing your insurance premium is right for you; please contact your insurance agent/broker or financial advisor. |