The term premium has several meanings.
In consumer sales, a premium refers to an additional product or benefit added to the main product to be purchased. Also, to “pay a premium” for something means to pay a high price for it.
In insurance, a premium refers to the amount of money paid to purchase a policy. It is necessary that insurance premiums are kept affordable. There is a chance that the premium will be higher than the actual amount of protection to be given. In such a scenario, it will be impossible to sell insurance.
Even though premiums are made affordable, though, they can still be difficult to meet. In such a case, the person to be insured might turn to premium financing, where they will be loaned money to pay for the premium. These are usually third-party financers, but in some cases, the insurance companies are also able to offer premium financing.
In order for this to happen, the person or entity to be insured has to sign an agreement with the financer. The terms such as the time period covered by the arrangement, must likewise be indicated.The premium is paid by the premium finance company, and the insured then pays them in monthly installments, or as often as agreed.
It is often easier for individuals to enter into premium financing agreements, as it is oftentimes difficult to come up with the entire premium immediately. If more than one policy is to be purchased, it can also be more convenient to just avail of one payment scheme for everything.