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Premium Funding, also known as Paying Premium by Instalments
Insurance premiums can be paid in many ways. Typically premiums are paid through the commercial payment system by cheque, cash, credit card or electronic funds transfer (including internet transfers).
It is also possible to pay insurance premiums by instalments. Some insurers accept monthly, quarterly or half yearly instalments.
Premium Funders also facilitate payment of premiums by instalments.
Premium Funders are not insurers but lenders. They allow policy holders to spread their insurance premium expense into monthly instalments, generally ranging from 6 to 10 months.
While Premium Funders charge commercial interest rates, generally they do not require any tangible security other than the right to cancel the underlying policy in the event of failure to pay any instalment.
Premium finance is a cost effective way to spread the insurance expense, smooth cash flow and free up working capital. The interest component may be deductible for tax purposes.
Major premium funders in Australia include:
E-Quine Insurance Services can arrange premium funding on your behalf in respect of all eligible insurance policies, irrespective of the insurer, underwriting agent or broker. Simply inform us of the amount of premium you have to pay, to whom and by when, and we will present you with various instalment options, from which to select the one that suits you best.
Key Advantages of Financing Your Insurance Premiums through Premium Funding
Annual Premium can be spread over 6 to 12 equal monthly instalments. It is a recommended that a maximum of 10 instalments be used, which provides a 2 month “holiday” before the next insurance due date.
It provides an “additional line of credit”, without encumbering any of your assets.
It allows the smoothing of your cash flow by paying monthly instalments, rather than an annual insurance account payable in advance.
It enables Working Capital to remain in your business and/or to take advantage of supplier’s bulk purchase or early payment discounts/rebates.
It is a cost effective finance method with credit charges comparable to conventional loan sources, with no on-going loan service fees. These credit charges are tax deductible.
There is no GST on the credit charges, or the application fee.
You may be able to claim the whole of the GST in your next BAS return (Tax Office ruling on prepayments less than 13 months in the governing legislation) – it is recommended that you seek independent advice in this regard.
Should you elect to premium fund your insurance now means you could enjoy a “double” cash flow benefit i.e. monthly instalments to pay for your insurance premiums PLUS the ability to include the ANNUAL GST amount in your next BAS return after having paid 1/10 of your annual premiums.
Instalment “holidays” can be arranged if your business is seasonal.
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