Evolution, Inc. since 1979
What is insurance premium finance?
Back to FAQPremium finance loans are simply a way for someone to acquire financing solutions for Property and Casualty insurance coverage. These insurance premium loans are short-term agreements lasting 4 to 10 months, allowing the insured or policyholder to make payments throughout the policy term instead of paying the full amount upfront.
Process of OriginationWhen a person/insured individual and an insurance agent decide to discuss the cost and premiums associated with financing an insurance policy, this marks the initial step in the origination process.
The agent then fills out a premium finance agreement, and then the person signs that premium finance agreement and pays a down payment which the agent will send to the premium finance company.
Premium finance company receives down payment from the now insured, then pays insurance company/carrier the balance of the amount financed.
The insured then makes monthly payments to a premium finance company instead of directly to the insurance company.
When a policyholder wishes to adjust their insurance coverage, their agent updates the policy accordingly. The agent may increase the premium through a positive endorsement or decrease it through a negative endorsement. These changes are communicated to the premium finance company, which adjusts the loan amount by adding or removing funds as needed.
If the policyholder defaults, the premium finance company initiates a cure process. However, if payment is not made, the cancellation process begins.
Premium finance companies issue cancellation notices to the insurance company. In compliance with legal requirements, the insurance company returns the unearned premium to the premium finance company.
The interest calculations and the complexities of accounting for APs, RPs, cancellations, reinstatements, etc. that take place behind the scenes is why normal loan software can’t work in this industry. Exactly why Evolution has been the leader in the premium finance software industry for more than four decades.