Everyone in business knows that cash flow is king.
Anything that can improve your cash flow is good, and one of the easiest ways to do this is through paying your business insurance monthly.
Most forms of business insurance, including public liability cover, can be paid via a monthly payment plan.
How it Works
Paying your business insurance monthly is a fairly straightforward concept. Instead of paying a large lump sum amount upfront, you simply pay for your insurance over a period of time using monthly payments.
There are two different ways in which businesses can obtain a monthly insurance policy.
The first is where the insurer offers a monthly plan. In this case the monthly premium is simply split into twelve equal payments, and the insurer may or may not add a small amount extra for the convenience.
Not all insurance companies offer monthly payments, however there is still a way to pay your insurance monthly even though the insurer doesn’t offer this option. This brings us to the second method, which is known as premium funding.
Premium Funding
Many of the large business insurance providers only offer annual policies without the option for monthly payments, but there are other companies known as premium funders who can get around this for you.
The premium funding company lends you the money for the annual premium and pays it directly to the insurance company. You then repay the premium funding company in monthly instalments.
This was the insurer gets their full annual premium up front, and you still get to pay the premium monthly.
Because the premium funder is essentially lending you the money, they will generally charge a flat rate of interest on the premium amount. This is where you need to decide whether or not it’s worthwhile paying the extra for the convenience of monthly payments.
Advantages
The major advantage of paying your business insurance monthly is the improvement to your cash flow.
Instead of having to come up with a lump sum amount at the start of each policy period, you can instead spread the premium over the whole year, which frees up money in the mean time for other productive uses.
Monthly insurance payments are also very popular with new businesses, as it reduces the amount of money required upfront and allows the premiums to be paid as the business earns money.
Disadvantages
The main disadvantage to paying monthly is the increased cost that usually accompanies monthly insurance payments.
Whether you pay monthly directly to the insurance company or via a premium funding facility, the insurance will generally cost you more over the full policy period when paying monthly.
Monthly Insurance at No Extra Cost
There are a number of insurers who offer monthly payments at no extra cost, however things aren’t always as they seem.
Often when someone offers monthly repayments at no extra cost it simply means that the extra amount has been built into the premium. This means that everyone is paying extra.
There is no point going with someone who offers monthly payments at no extra cost if the insurance is more expensive anyway. As always, it is important to do your research.
Monthly Quotes
If you are dealing with an insurance broker they will be able to provide you with monthly quotes both direct from the insurer (where available) and also via premium funding.
When obtaining monthly quotes it is important to ask the broker or insurance company if there are any extra fees included, as some will charge you an additional service fee upfront.
If you are charged an upfront service fee it is not necessarily a bad thing. Some premium funding companies charge a fee of say $50 upfront, but then your monthly repayments will be slightly lower, resulting in a cheaper overall package.
When comparing monthly quotes it is best to compare the total cost over the twelve months, rather than just comparing a single monthly payment.
Paying for your business insurance, including public liability insurance, can be a great option for many businesses. For more information speak with your insurance broker or get in touch with us.