Why you should consider financing your commercial insurance premiums

Premium Insurance


Kym Jefferies

Commercial Account Manager


Businesses of all sizes have been negatively impacted by the global pandemic and economic crisis, and many are struggling to stay afloat. While business owners may not want to spend their cash on insurance, now, more than ever, companies need to have the proper commercial insurance in place to protect their businesses and employees from a range of threats.


Unfortunately, struggling companies may lack the capital to make their insurance payments up-front; the current hard insurance market and rising insurance premiums make this an even greater challenge. Cash-strapped businesses need a way to get the right coverage while still keeping the lights on.


The solution for many businesses is to finance their insurance premiums.


What are the benefits of Premium Financing?

Premium financing alleviates a financial burden for business owners by providing a loan that allows them to pay their commercial insurance premiums gradually, over regular intervals, instead of paying a larger sum at one time. This offers businesses a number of benefits. It can:

  • Eliminate a substantial up-front expense

  • Enable owners to leverage their assets for business-critical needs

  • Finance multiple policies at once, allowing for one convenient payment for all coverage

  • Provide needed or required coverage without having to liquidate assets

  • Avoid the opportunity cost in paying out of pocket and retain much-needed capital

  • Be included in the budgeting/planning process


Premium financing is often provided by premium finance company, or sometimes by your insurance provider. In either case, the process is usually transparent to the buyer. Additionally, businesses can use their insurance policies as collateral for the loan.


Payment plan terms may vary depending on your specific needs and policy, but premium financing loans have no origination costs, offer fixed rates for the life of the loan, and have no pre-payment penalty.


What are the cons of Premium Financing?

The main drawback to premium financing is the same as with any loan – you have to pay interest. So over time you’ll be paying more for your insurance than if you paid up-front.


The good news is that interest rates are low right now, and are predicted to stay that way for some time, so you may be able to lock in a great rate.


Ultimately, you need to decide what is best for your business. Right now, for many owners, that might be getting premium financing so that you have access to more cash to keep your business running during difficult times.


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