Hong Kong Monetary Authority - Premium Financing (2024)

FAQs

What are the pros and cons of premium financing? ›

Pros of premium financing include improved cash flow, access to higher coverage limits, and potential tax benefits. Cons include interest charges and the risk of defaulting on the loan.

If whoever you owe knows you're there, they could file a claim, you might have your passport withheld and be prevented from leaving Hong Kong until a court-accepted form of agreement is made regarding repayment of your debt (of course including the principle owed, plus late fees and/or interest, court fees, and a fine, ...

"Insurance premium finance agreement" means a promissory note or other written agreement by which an insured promises or agrees to pay to, or to the order of, an insurance premium finance company the amount advanced or to be advanced under the agreement to an insurer or to an insurance agent, in payment of premiums on ...

Premium financing is an insurance funding arrangement where a policy holder borrows funds from a financial institution (usually a bank) to pay for the premium of a new insurance policy, and in doing so, assigns part or all of the rights under the insurance policy to the financial institution as collateral.

Personal loan vs insurance premium financing

If we compare personal loans and insurance premium financing, premium financing might be a better option than personal loans. “Typically, the interest rates for insurance premium financing range from 8% to 15%.

Life Insurance Premium Financing risks to consider:

These include interest rate fluctuation, market volatility and the possibility of collateral shortfall, which may lead to a margin call.

An action shall not be brought upon any judgment after the expiration of 12 years from the date on which the judgment became enforceable, and no arrears of interest in respect of any judgment debt shall be recovered after the expiration of 6 years from the date on which the interest became due.

Although the unpaid debt will go on your credit report and have a negative impact on your score, the good news is that it won't last forever. After seven years, unpaid credit card debt falls off your credit report. The debt doesn't vanish completely, but it'll no longer impact your credit score.

While debt technically won't follow you abroad, you may suffer several consequences for trying to flee from it: you may be sued and have your wages garnished; your credit score will suffer; you may have to pay taxes on your debt. These are just a few consequences of leaving the country with unpaid debt.

In addition to these publications, Premium Finance lenders also have a regulatory obligation to comply with the FCA's requirements and expectations⁷ and to ensure the delivery of good customer outcomes.

What is an example of premium in finance? ›

"At a premium" is a phrase attached to situations where a current value or transactional value of an asset is trading above its fundamental or intrinsic value. For example, "Company X is trading at a premium to company Y." Or, "A commercial building was sold at a premium to its underlying value."

Broadly speaking, a premium is a price paid for above and beyond some basic or intrinsic value. Relatedly, it is the price paid for protection from a loss, hazard, or harm (e.g., insurance or options contracts).

Allows you to take advantage of falling rates and pay less interest. Early repayment saving money on interest charges. Switching premium finance lenders should also be easier if you have a variable rate loan.

Rather than covering the entire premium payment upfront, the policyholder finances the cost of insurance coverage over time in installments. The concept began in the early 1900s when life insurers offered installment plans for policyholders who couldn't pay the entire premium upfront.

Definition: Premium paying term is the total number of years for the policy holder to pay the premium. Definition: Policy term is normally equal to the premium paying term. However, some insurance policies give the insured the autonomy to choose a premium paying term lower than the policy term.

Because equity financing is a greater risk to the investor than debt financing is to the lender, debt financing is often less costly than equity financing. The main disadvantage of debt financing is that interest must be paid to lenders, which means that the amount paid will exceed the amount borrowed.

Premium funding gives businesses the ability to pay their insurance premiums in regular instalments, rather than in one large lump sum payment. That means more cash flow, more flexibility, and in turn, more opportunity.