Having insurance is a wise investment that gives policyholders the peace of mind that they will be protected in the event that a problematic event occurs. Sometimes, however, having this protection can be an issue because paying for insurance premiums is an additional out of pocket expense. If an individual or a business experiences financial challenges, insurance premium financing could be a possible solution to help stay protected through an insurance policy. If you are located in Willmar, Minnesota, and want to better understand your insurance options, MG Insurance Inc. can help. Read on to learn more about insurance premium financing and if it is a possible option for you or your business.
Insurance Premium Financing: General Information
Whenever you purchase an insurance policy, you are required to pay a premium, which is essentially the cost of owning the policy. This cost is separate from the deductible you must pay when you make a claim. With insurance premium financing, a business or individual takes out a loan to purchase an insurance policy if they need help affording the cost of insurance premiums. Then, rather than making policy payments directly to an insurance carrier, a policyholder would make payments to a third party premium finance company, and that company would then cover the payment due to the insurance company. This type of financing allows the policyholder to spread out the insurance premium payment over time instead of having to pay the total premium payment up front. Insurance premium financing can be used for many insurance types, such as life or commercial insurance, etc.
Benefits and Drawbacks of Insurance Premium Financing
Although it may not make sense for every insurance policyholder, insurance premium financing can be beneficial in certain cases. If an individual or a business is in need of a significant amount of insurance for estate planning, protecting assets, or building up wealth and they do not want to use their current savings to make premium payments, premium financing allows you to spread out payments over time and avoid paying for costs up front, freeing up assets to help with other investments. It also allows a policyholder with multiple insurance policies to consolidate payments. It is important to note that insurance premium financing is a loan, which will need to be repaid and will accrue interest, which will increase the overall cost of the premium. Also, if interest rates are high, prices would increase, and it would not make financial sense to finance an insurance policy. Since it is a type of loan, you would need to provide collateral, and if you were to default on payments, the collateral would be forfeited.
If you want to learn more about your insurance options in Willmar, Minnesota, MG Insurance can help answer your questions. Contact our office today for a consultation.