Insurance Premium Financing
A Great Solution for Condo and Homeowner Associations
By Greg Mangram, City National Bank
Condominium and homeowner associations are faced with a large challenge every year when they receive the renewal of the association’s master insurance policy. In most cases, this premium is tens of thousands of dollars, and many associations do not have that large of a reserve to cover paying the premium in full.
Unlike personal insurance policies (automobile, homeowners, etc.) where the premiums can be paid over monthly installments, most condo and homeowner association policy premiums must be paid in full due to the relationship between the insurance broker and carrier.
Luckily for associations, there is a solution — insurance premium financing. In this situation, an outside vendor, such as a bank, will finance the large premium over the course of the year allowing the association to pay the premium over equal installments within 11 months, improve its cash flow and maintain its liquidity levels.
This short-term loan is typically at a low interest rate, and most vendors do not charge any fees associated with the loan. In addition, these loans have high approval ratings and typically close quickly, usually within 10 days. While interest rates vary depending on market conditions, typical insurance premium financing rates are between 2 and 6 percent.
The purpose of insurance premium financing is to allow condominium and homeowner associations the ability to pay out its premium over the course of the year, while at the same time making sure the insurance carrier is paid in full as required by the policy. This is an attractive alternative to associations having to come up with large sums of money within a short period of time.
When researching a vendor for insurance premium financing, look for one with an in-depth understanding of the factors affecting condominium and homeowner associations. Keep in mind that these premiums, while financed, will still need to be paid off within the year.
Insurance premium financing is an attractive alternative to paying premiums in full, allowing condominium and homeowner associations the ability to space out their payments and predict their monthly costs more accurately.
City National Bank is one of the largest community banks serving associations and property management companies. With a portfolio of more than 500 community associations, our dedicated community association services team has the knowledge and experience to help you meet your financial needs.
Free up your cash flow with Insurance Premium Financing. Take control of your receivables and keep your rainy-day fund. An 11-month term and quick turnaround gives your community the flexibility it needs.
City National Bank is a leader in community =association lending, with a streamlined approval process, local decision-making and a dedicated team to service your community’s financial needs.
All loans are subject to credit and loan requirements.
Equal Housing Lender / MEMBER FDIC
Gregory E. Mangram – Business Banker – (305) 577-7395