Definition

The practice of setting aside funds to cover future losses instead of buying insurance. It works best for those who can afford to pay for claims directly.

What to consider

  • Understand all associated interest and fees.
  • Review repayment terms and schedules.
  • Consider how financing affects overall costs.

Real world scenarios

  • A company uses premium financing to pay for a large group insurance policy over time.
  • An entrepreneur opts for premium financing to avoid a lump sum payment for his health insurance.
  • A business secures financing for premiums to manage cash flow more effectively.

Related terms

Insurance & Financial Protection