Insurance companies generally prefer to collect the full premium for the policy term—usually 12 months—upfront. However, not everyone can budget for a lump-sum payment. That’s where premium financing comes in.
Is insurance always prepaid?
Yes, insurance typically must be prepaid. Without this requirement, someone could obtain coverage, file a claim, and never pay for the policy—posing significant risks to insurers.
Who offers payment options?
Many well-known insurance carriers offer internal payment plans. However, certain insurers—especially commercial insurers—do not. In those cases, third-party premium financing is often the only solution.
What third-party insurance premium financing?
Third-party financing involves a lender that specializes in paying insurance premiums on behalf of the insured. The financing company covers the upfront insurance cost, and the insured repays the lender in monthly installments.
How do you qualify?
Credit checks typically aren’t required. Most applicants are approved the same day. However, some industries aren’t eligible, and policies with fully earned (non-refundable) premiums also don’t qualify, as the lender can’t recover the funds if the policy is canceled.
What’s the required down payment?
Usually around 25%. This amount covers non-refundable fees and minimum earned premiums, which are typically not recoverable if the policy is canceled. Since lenders can’t recoup these costs, they require them upfront.
Is there interest?
Yes—like any loan, interest is applied. Rates vary based on inflation and the amount financed. Larger premiums often come with lower interest rates.
Can you pay off the loan early?
Yes, the loan can be paid off early, usually without incurring a penalty.
What if payments are late?
If payments aren’t made on time, the financing company may request the insurance company to cancel the policy, as outlined in the loan agreement.
What if the policy cancels?
If the policy is canceled, any refund for unused premiums and commissions goes first to the financing company to repay the loan. Any remaining funds are returned to the insured. Refunds can take up to two months to process, but loan payments must still be made in the meantime.
Looking for insurance financing? Contact Chris Elliott Insurance Agency!
Our Seattle-based insurance agency offers competitive insurance financing options. If you miss a payment, we typically reach out before cancellation occurs. Reach out to our team today!
