Many businesses choose to spread their insurance premiums across the year rather than paying a lump sum, and in many cases this is done via premium funding.
Premium funding is a way of financing your business insurance premiums over a period of time. Not all insurance companies offer monthly payments, and premium funding solves this problem.
Why Premium Funding?
Unlike the mainstream insurance companies such as Suncorp and NRMA, most business insurance providers do not offer pay by the month business insurance.
Rather than being forced to pay their premiums annually in a single lump sum, businesses have the option of spreading their insurance payments over a period of time by using premium funding.
There are various companies offering premium funding services in Australia, and in most cases your insurance broker will have a preferred supplier.
How Does It Work?
Premium funding basically involves borrowing the money for your premium and then repaying the amount over a fixed period of time no greater than twelve months.
When you use a premium funding service, the funding provider will pay the insurance premium on your behalf. If you cease making repayments the funding provider has the ability to cancel your insurance.
As with all forms of financing, there are fees and interest involved. Most premium funding companies charge an upfront credit fee of around $30 along with an annual interest rate.
The interest rates charged by the premium funding companies do vary, and generally the higher your premium amount the lower the interest rate will be.
Premium funding is available for a range of covers including public liability insurance and other forms of business cover. In some cases it is also available for personal insurance, however this is a less common use.
The number one advantage of premium funding is that it allows you to spread your insurance costs across a longer period of time.
Instead of having large sums of money tied up in insurance premiums, you can be redirecting that money to other more productive areas of your business.
Premium funding is also very popular with new businesses and those which are sensitive to cashflow issues. Premium funding can allow you to obtain the insurance you need without taking a big bite out of your cashflow.
It’s a fact that paying for your business insurance via premium funding will be more expensive. Generally you are looking at a small upfront fee as well as an ongoing interest rate.
Whilst paying monthly will be more expensive than paying upfront, many business owners find that the extra expense is worthwhile due to the cashflow benefits to their business.
If you are interested in paying your public liability or other business insurance types via premium funding, the best option is to speak with your insurance broker about a solution that will best suit you.
If your insurance broker or company does not allow monthly payments or premium funding, please contact us here at Public Liability Insurance Australia and we will put you in contact with an insurance broker or adviser who can assist you.
To obtain a quote on pay by the month business cover, please complete our public liability insurance online quote request form.