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News
News You Can Use - Finance Do's and Don'ts
Bulletin – Monday, October 21, 2019

Tuscano is running a series of articles intended to help producers navigate certain insurance rules and regulations that you might not come across all that often. Our goal is to prevent a situation where you or the policyholder suffer from unintended consequences. According to Warren Buffett, “Risk comes from not knowing what you're doing”, in which case, that is not the risk business we want to be in! Read on for the second bulletin in our News You Can Use series.

Finance Do's and Don'ts

Insurance premium financing is an easy and practical solution for policyholders with large (or not so large) premiums due in a single payment. But before you offer financing to a policyholder, be sure to check this practical list of Do’s and Don’ts.

Don’t Finance:

  • Special Events
  • Short Term policies of less than under 6 months               
  • Policies with a 50% Minimum Earned or more
  • Audit Premiums on an Expired policy
  • Carrier Direct Bill (In rare instances we can make an exception, such as if the financing payment terms are more accommodating than the direct bill terms, or there are multiple polices and the insured prefers one installment payment
  • Fully earned additional premium endorsements added mid-term
  • Policies with loss sensitive earning provisions (i.e. a reported loss makes the premium fully earned)
  • Policies that are auditable upon cancellation where there is no return premium if the cancellation audit is not completed

Do:

  • Review the policy information and payment terms shown on the finance agreement with the policyholder
  • Sign & date the finance agreement confirming that policy information is correct as shown
  • Collect AT LEAST the minimum earned premium as stated on the policy plus taxes and fees OR whatever the down payment is shown on the finance agreement
  • Explain to your commercial auto policyholder who has filings, that a mid-term policy cancellation request will be not take immediate effect. Instead, the filing authority must be given 35 days notice and the premium will continue to earn
  • Remit the down payment to Tuscano, either through a web payment or off your monthly account current; in fact, we encourage you to retain your commission
  • Advise the policyholder the first installment payment is due to the finance company 30 days from the policy effective date
  • Explain to your policyholder that upon cancellation or a return premium endorsement, the money will be returned to the finance company to pay off the financing balance before they receive any funds
  • Remember, if the policy cancels mid-term you will owe return commissions as well