A loan arrangement that lets a policyholder pay a large annual premium in installments while the insurer is paid up front.
Premium Finance
A loan arrangement that lets a policyholder pay a large annual premium in installments while the insurer is paid up front.
Premium financing is a lending arrangement, common on commercial policies, that lets a client spread a large premium over monthly installments instead of paying it all at once. A premium finance company pays the carrier the full premium up front and the insured repays the finance company with interest.
It is used when a policy is agency-billed and the carrier does not offer its own installment plan.
- The finance company holds the right to cancel the policy for the unearned premium if the insured stops paying.
- A finance agreement documents the down payment, installments and interest.
For agencies, premium finance makes larger accounts more affordable to clients and is often arranged through third-party finance companies integrated with the management or billing workflow.