Within the insurance industry there are a variety of truck insurance payment options (premium billing programs) that you may take advantage of when purchasing truck insurance.
Truck Insurance Payment Options
- Direct Bill Some insurance companies bill the customer directly without the insurance broker being involved. The customer receives a monthly bill and mails the payment directly to the company. This type of billing may allow various down-payment amounts and balance is billed monthly without an interest or service charge. If the company offers this type of billing some customers prefer this as they can come up with a lower down payment and no interest charge.
- Premium Financing When an insurance policy is bound through an insurance broker and the insurance company does not offer a billing program the insured has several options. The insurance company must receive full payment immediately from the broker. Therefore, the insured may pay the annual premium in full or pay a down payment and premium finance the balance. The standard for finance billing is to provide a 25% down payment plus fees and the balance is billed over 8 to 9 monthly installments which includes interest. This is a viable alternative, although there are interest charges, as some customers may have large premiums and cannot come up with the annual premium at the time of binding of the policy(s).
- Continuous Billing Policy Few companies offer this type of billing. With this type of billing the insured at the time of purchasing the insurance would provide a down payment which in effect is a deposit which the company holds until the policy cancels. The annual premium would be divided by 12 months and the insured would provide 2 months as a deposit and make the first months payment. Thereafter, the company will bill the insured monthly. If there are premium changes to the policy during the year more deposit or return of deposit may occur. Although there are no interest charges a monthly service charge may be added to the bill.
Once a policy is in force there may be premium changes as the insured may add or delete units or coverages. When these changes are requested by the insured the broker will then inform the appropriate insurance companies. If there is an addition of a unit or an increase of coverage an estimate is quoted to the customer and 25% of this premium is collected. If the policy is premium financed the balance of the additional premium will be added the premium financing and billed to the customer. The insurance company received full payment from the finance company. If no financing exists the insured may be required by the broker to provide the full estimated payment or wait until the original endorsement from the company is received to obtain payment. Deletion of coverage or unit will signal the company to return premium to the premium finance company or the insured if there is no financing. These additions and deletions are what cause confusion for the customer. The insurance companies often take from 2 weeks to 6 months to process endorsements and can be a paper lag time.
- Gross Receipts Billing This type of program is generally for large fleets. The annual gross receipts are provided monthly and that number times the insurance company rating factor will determine your monthly payment. These programs vary greatly depending on the risk.
Those are just a sampling of various billing programs available. It is imperative that you understand the billing process to be able to take advantage of programs that best suit your needs. Take advantage of your truck insurance broker to answer any questions that you may have.