Many businesses facing the prospect of large insurance premiums choose instead to finance the premium payments through lenders known as premium finance companies. These companies typically pay the entire annual premium to the insurance company up front, and the policy purchaser then makes monthly payments to the premium finance company, plus interest. If a policy purchaser fails to make its monthly payments, the premium finance company sends a notice of cancellation – with an “effective date” – to the policyholder. If payment is not made by the “effective date” on the cancellation notice, the policy is cancelled.
It is a smooth enough process when businesses are making their payments on a timely basis and when the business paying the premiums is the same business that maintains the policy, but that is not always the case. When the situation gets complicated, businesses may lose out on valuable claims. Continue Reading