Managing cash flow and budgets as an ongoing task for businesses that often involves challenges around large annual and unexpected expenses, and/or revenue gaps. Paying business insurance premiums at renewal time can present a significant drain on resources and liquidity – but there is an alternative to lump sum payments: premium funding.
Insurance premium funding is a simple, fixed rate loan that enables a business to spread the cost of their insurance over a year instead of paying upfront. Here we look at the main features of premium funding and some of the most commonly asked questions about what’s involved.
1. What payment options are available instead of paying the year’s insurance premium in a lump sum?
If you’re unable to pay your premiums upfront or want to retain working capital for business operations you can opt to spread your annual premium payments over a year, broken down into monthly payments.
2. What are the advantages of using premium funding for business insurance?
A monthly payment schedule gives you the flexibility to retain cash flow and liquidity so that you’re better positioned to meet demands of unexpected outlays.
3. Who is eligible for premium funding on business insurance premiums?
This is a financing option that your business insurance broker can arrange with the premium funding provider and insurer, for approved clients. Eligibility criteria include a commercial credit check on your operation and potentially the need for financial statements to be provided, depending on the size of the loan.
4. Does premium funding require security?
Unlike a bank credit facility obtaining premium funding does not require security, so your business and personal assets remain unencumbered.
5. Does premium funding on business insurance cost extra?
As with other types of financial credit there is an interest cost for funding business insurance premiums. The precise rate is based on factors such as the size of premium, tenure of the loan and how many instalments may be paid upfront.
6. Can I get premium funding on all my business insurance policies?
Almost all business premiums can be funded. The exception is the premium for surety programs, which are excluded.
7. How long does the application, quotation and approval process take?
Not long at all. Once the paperwork is complete, the process is usually swift – you will be able to set up your premium funding arrangement within 24 to 48 hours.
Looking for help with your business insurance?
Working closely an expert insurance broker ahead of a business renewal provides you with critical insurance guidance and negotiation points to gain the optimal solution available for your business, industry and situation.
Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective.