How are you paying for your business insurance?
Property and casualty insurance can be a major outlay for companies of all sizes.
P&C carriers who have provided coverage to you for a year or more, have assessed whether you are a good partner.
Part of your decision process in choosing a carrier has to be price but also ask how the carrier wants payment. For a low interest rate the carrier may offer to allow you 9 or 12 months to pay the premium. Compared to a large up-front premium which would take money away from the company’s working capital, these payment options can help smooth out cash flow for firms.
Weigh the interest rate being offered by the carrier against other available sources of cash. If you have plenty of borrowing capacity, make sure the carrier’s rate is reasonable and consider preserving your borrowing capacity for other needs. If your borrowing needs are close to your limits, financed insurance premiums can be an excellent source of additional financing, even if the interest rate is higher than your other sources.
Health insurance premiums are harder to finance through the carrier. Typically the carrier wants monthly payments up-front on the first of the month. However, they may provide you with a few days of grace if you ask.
In all cases, higher self-insured retention will lower premiums. Be careful to reasonably review your expected losses and the timing of those losses. Can you handle the deductible or self-insured component cost if the loss creates a spike in your cash flow?
Insurance purchases are complicated. Teaming up with an experience financial professional provides you with an independent ally who will sort through the complexity.
B2B CFO® has over 200 experienced chief financial officers who stand ready to help businesses improve their cash management processes.