Premium Funding

Premium funding is a financing arrangement where a third-party lender pays your insurance premium upfront, and you repay them in monthly instalments with interest. It helps businesses manage cash flow by spreading the cost of insurance over the policy period.

Think of it as a short-term loan specifically for your insurance bill. The lender pays the insurer, and you pay the lender back over 10 to 12 months.

Why It Matters

• Insurance premiums can be a significant lump sum, especially for businesses with multiple policies. Premium funding spreads that cost out.
• It keeps cash in your business for operations, growth, and other priorities instead of tying it up in a single annual payment.
• It’s available for most types of business insurance, including public liability, professional indemnity, property, and motor.
• Your broker can arrange it as part of the policy setup, so it’s a seamless process.

Show Transcript

Not factoring in premium funding or flexible payment terms. Why does this matter? Well, it matters because cash flow is king when it comes to businesses. Lump sum payments can be an absolute drain on your capital. So, how can you take advantage of this? Well, ask about premium funding. A premium funder is someone that steps in to pay for your insurance costs and then you repay them back with some interest on top. Of course, it's more expensive than just paying for the insurance up front, but the difference here is it helps with cash flow. And it means more cash flow in the business for you to hopefully continue investing that for growth in other areas.

How It Works

1. You take out your insurance policy and your broker arranges premium funding.
2. The premium funder pays the full annual premium to the insurer on your behalf.
3. You repay the premium funder in monthly instalments (usually over 10 months) with interest and fees.
4. Your policy is active from day one, fully paid and in force.

What It Costs

Premium funding does cost more than paying upfront because you’re paying interest on the loan. The interest rate varies by provider and the amount being funded. Your broker can give you the exact figures so you can compare the cost of funding versus paying upfront.

Common Mistakes or Misunderstandings

• Thinking it’s the same as paying monthly to the insurer. Some insurers offer monthly payment options directly, but premium funding is a separate finance arrangement with a third-party lender.
• Not factoring in the total cost. The monthly payments include interest, so the total cost over the year is higher than paying upfront. Make sure you compare both options.
• Missing a payment. If you default on your premium funding payments, the funder can cancel your insurance policy. Always keep up with payments.
• Assuming it’s only for large businesses. Premium funding is available for businesses of all sizes, including sole traders and small operations.

When to Speak to a Broker

If your annual insurance bill is putting pressure on your cash flow, ask your broker about premium funding options. They can compare funders and find the best terms for your situation.

Need help?

Want to explore premium funding for your insurance? Reach out to Tank Insurance and we’ll walk you through the options.

Related Terms

• Insurance Premium - The annual cost that premium funding helps you spread over monthly payments.
• Broker Fee - Your broker’s fee is separate from the premium and may or may not be included in the funded amount.