February 17th 2021
The importance of down payments for premium finance contracts
I'm regularly asked to lower down payments for premium finance contracts, so I thought I'd quickly share the rationale behind requiring one and to give an idea of the impact of lowering one.
Firstly it is important to note that our business model at IFS does not include asking the broker to pay any bad debt incurred as a result of a client refusing to pay any monies due to us under the terms of the finance contract. We're here to protect your agency bill receivables, one and done.
I have come across many situations where a broker tells me that they can get financing elsewhere with a lower down payment than the MRP. Just make sure that as a broker you protect yourself and your brokerage by asking the question of who has to pay for the shortfall if the client defaults on payment, the premium finance company or the broker!
Our standard plan at IFS is 25% down and 9 installments. We can of course customise both the downpayment and the number of payments for you, however the actual cost of financing for the client will be more as there will be more money financed over a longer time period. Cost aside, we can work with you within the parameters outlined above.
Quick Note: We cannot finance policies with 100% MRP or bonds as there is no return premium from carrriers upon cancellation.
Please let me know if you have any further questions about downpayments or premium financing in general. Hope you found this artice somewhat informative.
Take care and stay safe,
Ontario Business Development Manager