What can be done with Insurance Premiums?
Every business should have a kind of backing financially in order to keep the company running, insurance is one of the most effective means. Insurance is the process whereby an individual pays a sum of money to an insurance establishment for future backing financially.
The insured (the insurance buyer) receives a contract containing the full details of the conditions and circumstances under which the insurer (insurance company) would compensate the insurer. The sum of money charged by the insurer to the insured to cover the insurance policy is called a premium. We have different types of insurance from health insurance, business insurance, casualty insurance and more.
Sometimes when the primary insurer cannot cover the risk, the insured can take out a reinsurance from another insurance establishment thereby splitting it between to insurance companies. However, this article is solely based on what an insurance premium funding is, how it works, how to get it as well its benefits and advantages.
What is Insurance Premium Funding?
Insurance premium funding is a way of funding the sum of money required by the insurance company for the coverage of the insurance policy. This is usually provided by third party finance company called premium funding companies. Business owners are aware of the risk involved in not getting an insurance for their company. For example, an individual ABC owns a construction and building company which specializes in building of houses (buildings) and construction of roads. This kind of work can be risky. There is no way there won’t be one or two casualties. Therefore, if the owner of the company doesn’t have insurance then, he might have made of the already planned money to take care of the casualties. Insurance is very paramount! Most insurance companies also offer a kind of premium funding package for individuals, most especially life insurance. They can loan you the amount (premium) which would be repaid in installments, probably, monthly or yearly. An agreement has to be signed before getting on with the process.
There are a few ways of financing an insurance premium. Before involving yourself or company in an insurance premium funding, you need to have a little knowledge of the options you have. Some of these include:
Recourse Insurance Premium Finance
In this kind of insurance premium funding, the customer enters a collateralize agreement with premium funding company. The client makes use of property as collateral for the funding. This kind of insurance premium finance is mostly suitable individuals who have a lot of non-liquid assets- assets that cannot be converted into money. It is better when it comes to interest on loan and so on.
Non-Recourse Insurance Premium Finance
This kind of insurance premium finance is almost like the former. It also requires a kind of collateralize investment in which a property can be held as a security for the premium funding received by the client. This kind of insurance premium finance is not suitable for a client who has a lot of non-liquid assets. Only liquid assets, most especially cash, are accepted.
How Insurance Premium Funding works
Insurance premium funding simply involves sourcing for financial security or backing in case of any future risk or damage. The price of an insurance premium offered by the insurance company depends on a few factors such as the location of the client, background, Net-worth of the company or business being insured.
However, how premium funding includes the following below:
Sourcing for funds from a premium finance company.
The premium finance company pays the premium in form of a loan.
The loan repaid to the lender through monthly installments over a period of time.
Benefits of Insurance Premium Funding:
As much as insurance is important for a business in order avoid future expenses that can lead the company into bankruptcy, it is important to know that paying for an insurance premium out of the company’s pocket might also be injurious to the company. This is one of the most amazing advantages of insurance premium funding.
Other benefits include:
It gives the client a better alternative instead of liquidating other assets.
It helps the client dodge the requirement of making large payments upfront.
Premium financing companies require monthly repayment of loan for a period of time which allows for a better cash-flow instead paying the whole sum at once.
In spite of the fact that insurance premium can be exhausting on your income, they are an essential piece of securing your own assets together with those sold or financed. There are several alternatives for making your insurance premium less demanding on your shoulder.
mhf can help organize premium finance companies starting from $5000 to free up income and guarantee your laborers pay, proficient reimbursement and so on. We are highly experienced in the field, we know what you want and how to go about it. Talk to our team today and secure your future.