| Premium Financing Questions and Answers |
What is premium financing?Premium financing is not actually buying an insurance policy; rather, it is a method a person can use to finance the purchase of an insurance policy. A contract is signed between a borrower and a lender, not a policyholder and an insurance company. The buyer obtains a loan from a party other than the insurance company and signs a contract agreeing to repay the amount of the loan, plus any interest and fees. What are the benefits of premium financing?Increased cash flowBy taking out a loan to pay for your insurance, you avoid having to pay the premium all at once. This means you have more freedom with your money, while keeping money in the bank and preserving your credit line. Consolidated insurance payments Several policies can be combined into one payment plan from one finance agreement. In addition, policies that take effect in the future can be added onto your already existing contract. Fixed rates Your annual percentage rate stays the same for the duration of your loan, unless otherwise specified in your contract. Tax-deductible interest on loans Interest on premium financing loans may be a tax-deductible expense. Contact your tax advisor for more information Loan prepayment Prepaying your loan at any time, in most states, will not incur additional charges beyond those on the interest earned before the prepayment is made.
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