Advantages of Premium Financing
n order to preserve cash flow or for other economic considerations, an individual or company (an “insured”) may choose to finance the cost of their insurance coverage. An insurance agent places coverage with an insurance company on behalf of an insured. The insured may then request that the insurance agent arrange the financing of the insurance coverage. The insured signs a premium finance agreement which is then submitted by the insurance agent to a premium finance company, such as Standard Funding Corp. The premium finance company then pays the insurance premium on behalf of the insured.
By financing their insurance, the insured has entered into a loan contract with the premium finance company and has given the premium finance company the authority to cancel the financed insurance coverage in the event the insured defaults in making scheduled loan payments. By financing their insurance, the insured has also given the premium finance company a security interest in any unearned insurance premiums which, when received by the premium finance company, are applied to the outstanding loan balance due from the insured.
In general, payment plans available under an insurance premium finance arrangement consist of a down payment followed by equal, monthly installments. The amount of down payment required, as well as the number of installments to be paid by the insured, may vary depending on the underlying insurance policy terms and conditions, the nature of the insured’s business and the credit worthiness of the insured. The complete terms of the premium finance loan, including the payment schedule and interest rate charged, are reflected on the finance contract.
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