Condo, Coop and HOA Master Insurance Premium

I’m sure that a lot of condo/coop & HOA board members have the following question: how come on my Automobile & HO-6 Insurance policies I pay the premiums directly to the insurance carrier, and I have the option of monthly installments, whereas on the condo/coop or HOA master insurance policy I have to pay the premiums to my agent or broker, and the premium has to be paid in full upon binding of the policy and if I can’t afford to pay it in full then we have to get premium financing? That’s a very good question, and it all comes down to 2 main ways that insurance premiums are being charged:

  1. Direct Bill
  2. Agency Bill

Direct Bill

Most personal lines insurance policies, including personal automobile insurance, homeowners insurance, renter’s insurance and personal umbrella insurance are direct bill. This means that the insurance carrier is billing the policy holder directly. Most personal lines insurance policies come with the option of quarterly or monthly installments, you’ll have to pay a down payment (usually 20%) upon binding, and the rest will be split up to quarterly or monthly installments. In most cases you’ll be charged a small fee for every installment anywhere from $1 to $6 depending if you set up automatic withdrawals from your bank account. Once the policy is in effect, the agent or broker has nothing to do with the billing of your insurance policy (of course he’ll get a notice of cancellation if you don’t pay your premium and call you up to make sure that you’ll make a payment so your policy shouldn’t cancel). This is why on all your personal insurance policies you pay the insurance company directly and you have the options of installments.

Agency Bill

But when it comes to your condo/coop or HOA’s master insurance policy it’s a whole different story. Most condo/coop or HOA policies are agency billed, this means that the insurance carrier is billing the insurance broker the full policy premium, and the broker has to bill the condo/coop or HOA association. The broker usually has 30 to 90 days to pay the full premium to the insurance carrier. This is the reason why you pay the insurance premiums to the insurance agent or broker and why it has to be paid in full. But what if your condo/coop or HOA association can’t afford to pay the whole premium at once?

Premium Financing

Most condo/coop or HOA associations don’t have extra money lying around, so when your policy premium is more than $20,000 it’s kind of hard to pay the full amount up front, that’s when premium financing comes in to play. Your insurance broker should help you out with the premium financing; there are a lot of good financing companies out there. The interest rates are usually between 6 & 10%. They will only finance about 80% of the premium, which means that you’ll have to pay about 20% upon closing. How does the whole financing process work? The financing company sends a check of the full premium (minus your 20% down payment) to the insurance broker. Then the insurance broker sends to the insurance company the down payment that he got from the condo/coop or HOA and the check that he got from the financing company (minus his commissions). Then the financing company is going to bill you monthly or quarterly with a 6 to 10% interest rate. The following is something that unfortunately happens quite often: The insured made sure to have the policy paid up in full, whether by paying the full amount or by getting premium financing, and after a few weeks they get a notice of cancellation in the mail. What happened here? Very simple, your broker received the full amount, now he has up to 60 days to pay the company, and very often brokers neglect or on purposely delay paying the insurance company right away. This is wrong and illegal and you should stay away from such insurance brokers.

How Your Credit History Affects Your Car Insurance Premium

Today, credit reporting bureaus are a source for determining many financial and legal matters. They are not only for getting a mortgage or personal loan or for financing a business project. The credit bureau has become a source of valuable information for banks and other lenders, employers, courts and insurance companies. So as you can see, keeping your credit score up as high as possible is important. It can help you in many aspects of your life even if you never acquire much debt.

Why Do They Care?

You might ask, “Why should a car insurance provider care about my credit score?” Simply put, insurance companies have found through much research that a person’s credit or debt and related spending behaviors is directly related to the number of claims he might file with a car insurance company. In many cases (although not always), the insured with a high credit rating that pays his bills faithfully and on time demonstrates responsible behavior that reduces his risk for accidents. On the other hand, a person with a low credit score or derogatory marks against his credit history such as bankruptcy, repossession or non-payment of debts is likely to have more claims.

Car insurance companies understand that each individual’s situation is different. It’s not cut and dry with credit score ratings. That’s why credit scores are just one of the algorithms included in a providers research. Another thing to consider is a consumer with a very good credit rating is likely to be a middle-aged or older driver. This also affects the insurance premium in a positive way if the driver has kept his driving record clean all those years.

Legality of the Matter

Car insurance providers do have a legal right to view your credit report under the Federal Fair Credit Reporting Act. In this act, scores and history must be made available to insurance companies, credit lenders, employers and a few other agencies. You should be at ease to know that when the insurance company views your credit report, it will not affect your score negatively.

The Insurance Credit Score

Some providers use an insurance credit score. They use a number of factors to create this score such as the type of credit you have with retail stores, finance companies, banks, credit cards, etc. Other factors are the number of credit inquiries showing on your history, open lines of credit, unused credit and the length of your history. With the insurance credit score, the provider can predict whether or not you are a high-risk consumer.

As you shop for car insurance, be sure to find out if and how your credit rating will affect your premium. Insurance providers vary in the merit they put on credit scores, so if you have less than perfect credit, it pays to shop around. Use online comparison sites to find the best quotes from top rated providers. As you seek affordable car insurance, ask about discounts that can help lower your rates. Many providers allow discounts to be given in a number of situations.

Try to keep your credit score high and your records clean to enjoy lifetime benefits including lower car insurance!

Benefits and Risks of Life Insurance Premium Finance

Life Insurance Premium finance is the safer way of purchasing life insurance, especially for high net worth individuals. It allows a company to borrow the cost of life insurance premiums. It usually occurs when the company has a very high premium that makes it necessary to borrow the amount in part or in whole to prevent reducing the company’s liquidity.

More often than not, traditional lenders don’t provide premium financing, and business owners need to look for specific premium financing providers to secure the loan.

Benefits of Premium Finance

When a company releases a large amount of payment, its owner must first consider whether the funds are needed for the daily operation of the company or for the expansion of the business. And in order to prevent liquidating some of the company’s assets or using key funds, financing is required.

More often than not, businesses depend on some type of loan to be sustainable. Premium financing is often a part of the debt cycle for company with high corporate owned life insurance costs.

A business owner can finance multiple policies via a single agreement that allows the owner to make a single insurance premium payment a month. In most cases, insurance companies accept premium financing and accept payment straight from the finance provider. When that is the case, the premium finance company will bill the business owner instead of the insurer.

Premium Financing of Non-Qualified Executive Bonus Plans

Premium financing can be used on non-qualified executive bonus plans, which are available for vital employees of any type of corporation. The employer has the discretion to select the workers to cover and the amount of the bonus. The business owner pays for the premiums on the policy, and the employee has to pay tax that’s equal to the premium amount.

Financing of 770 Accounts

A 770 account is a permanent life insurance policy that has been structured to maximize its cash value. By maximizing the total death benefit and cash value, you can maximize the cash value of the life insurance policy. More often than not, the cash value is tax-free and can be accessed at anytime.

770 accounts have a very competitive rate of return and can be used as collateral. But the premiums can be high. High net individuals or business owners can resort to financing in order to keep up with the premium payments without the need to liquefy assets.

As you can see, financing life insurance premiums can help individuals and companies that need to pay large amounts of premium. It allows them to stay liquid while providing insurance coverage to oneself or one’s employees. This is ideal for corporate owned life insurance programs as well as private banked owned life insurance policies.