What is premium financing and how does it work?

Let’s talk insurance. Insurance has a wide range of benefits including protecting you against financial loss and property damage, giving you peace of mind, meeting legal requirements, giving you access to specialized services, and even supporting your business. We don’t talk about insurance enough… until we need it and then it’s too late. Your insurance premium is a payment you make in exchange for coverage. For example, if you pay a premium for car insurance, your insurance company will provide coverage if you get into an accident.

But insurance premiums are expensive right? The truth is that they don’t have to be. Premium financing allows you to take out a loan for general insurance premiums so you can pay smaller monthly instalments instead of one larger lump sum. You will have all the benefits of insurance, with more manageable costs.

So, this service is just for people who can’t afford to pay their premium in full? False! Even those with high net worth may choose premium financing because it allows them to preserve their cash and use it for additional investments. Premium financing also allows you to access better insurance coverage, which might have been too costly if you had to make a single payment, but which can be paid easily over a more extended period of time.

The process of premium financing is quite simple. First, you – the borrower – choose an insurance policy. The lender usually requires the submission of basic documents, such as a form of identification and proof of first payment. The best premium financing programmes will not conduct a credit check, so financing can be quick and easy. Then the lender pays the full insurance premium, and you repay them via regular monthly instalments.

Before agreeing to a premium financing programme, you should assess the lender’s methods of repayment. One of the major benefits of premium financing is convenience and you don’t want to inconvenience yourself each month just to make your payments. Look for programmes with options like direct debit, post-dated cheques, online bank transfers and over-the-counter payments, where you can use all major methods such as cash, linx, or cheque.

Are there any risks to premium financing? The major risk would be defaulting on the monthly payment; however, that’s a risk you take with any loan. This risk can be easily avoided by choosing a provider who will work with you to ensure that your monthly payments are manageable. You don’t just want a provider who is trying to sell you a product. You want a provider willing to discuss your financial health in its entirety and work with you to give you a tailored solution.

So, premium financing is easy to obtain, and it gives you more flexible cash flow with all the benefits of full insurance coverage and very minimal risks. If you want to explore how these benefits can help you, talk to a financial advisor or contact a trusted provider and ensure that you have all the insurance coverage that you need.