six different ways available to finance premium.
Brokerage financing
financial institution financing
insurance company financing
premium finance companies
Captive finance company
cash only financing
Advantages and disadvantages of Brokerage Financing
Disadvantages = ignores the time-value of money, the additional work create and most importantly, it actually incentives client to pay slowly
Advantages = Client pays in cash but is not required to pay for total sum at the inception of the policy. It includes the service charge and might be seen as a substantial source of income.
Advantages and disadvantages of Financial Institution Financing
Advantages = brokerages receive premium in advance, easy payments to the financial institution.
Disadvantages = brokerage responsible for payment and remains responsible for borrower’s bad debt.
Advantages and disadvantages of Insurance Company Financing
Disadvantages = most cases only annual policies qualify and is subject to a minimum premium.
Advantages = Brokerage don’t need to handle billing and they receive premium payment soon.
Advantages and disadvantages of Premium Finance Companies
Advantages = companies that deal exclusively with insurance premiums. At the inception of the Premium Finance Companies pays the total premium to brokerage, who enjoys the benefits of prompt commissions. Reduce billing expenses, lower accounts receivable and brokerage can invest the money until due to insurance company.
Disadvantages = Finance Fee
