Premium funding is a great way to smooth out your business insurance costs over the course of the year.
It means rather than having to pay the total amount of the premium upfront, the business can pay it off in instalments, plus interest. The cost of the interest will usually be a tax deduction for the business.
How does it Work?
We will put your policy in place as normal, but instead of you paying the full invoice up front, we will setup a contract with a premium funding company (‘the funder’). The Funder is an external provider that facilitates the payment of the policy on your behalf and it will be your responsibility to repay the funder over a period of up to twelve months.
Ultimately this is a form of financing, hence why the product is sometimes referred to premium financing.
As with all types of financing there will be an interest rate which applies to the contract. The interest rate is almost always a fixed rate and will be confirmed at the time of taking out the policy.
The most common term for a premium funding contract is ten months. This means that you must repay the funded amount within ten months.
It is also possible to repay the amount over twelve months, which is great from a cashflow perspective however the fees and charges can be higher in some cases when compared to a ten month contract.
Important things to consider
The most important factor to keep in mind is that paying your insurance monthly via premium funding will be more expensive than paying the full amount upfront.
It’s also important to know that if you cancel your insurance, your monthly repayments will not necessarily stop immediately.
What will happen is that the funder will receive any refund from your insurance company after the cancellation, and will then calculate whether or not any money is still outstanding.
There are a few factors which will impact upon how much is still owing, but generally speaking you could expect to pay at least one more monthly payment after cancelling your insurance.
When you enter into a premium funding arrangement, you are entering into a formal contract with the funder.
You won’t always be required to sign a copy of the contract, but the contract is certainly enforceable if you choose to stop making repayments for any reason.
Benefits
Ask us for a premium funding quote if you think this option could be beneficial.
