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With today’s inflation, most Homeowners Associations are currently feeling the pinch in the budget due to rising costs. There are several things an association can do to help lessen the impact inflation has on their community, from cutting costs to reassessing their budget. Today, we’ll cover one tool that will help your association navigate through difficult financial times—premium financing.

What is insurance premium financing?

Essentially, insurance premium financing works like a loan. Premium financing is an insurance practice that allows the buyer of a policy to rely on a lender to pay their insurance premiums. This method is generally utilized when a buyer is interested in purchasing a substantial policy, like one for an HOA.

Why does an HOA need it?

An HOA can utilize premium financing much in the same way an individual would. Premium financing would eliminate the need for an association to pay the entire policy upfront. This would free up funds and improve cash flow within the HOA to do other things for the community, such as routine maintenance, upgrades, repairs, or allocating more to the association’s reserve fund.

If an association needs multiple insurance policies, they can be rolled into a single Insurance Premium Loan Agreement, if the policy terms and dates line up. This way, HOAs do not have to worry about which policies must be paid for right away and which have already been covered by premium financing.

Having the right coverage is crucial in the event of any calamities or unforeseen natural disasters. If the association cannot pay for insurance policies outright, premium financing might just be the right decision for your HOA.

Tips for Selecting an Insurance Premium Financing Provider

When shopping around for a lender, here are a few things to keep in mind:

  • The lender should not require any personal guarantees. The association itself should be the borrower and individual board members should not have to take on the responsibility. Doing this will limit board members liability.
  • The lender should not assess prepayment penalties.
  • The lender should not attach assessment liens as part of the loan terms.

If your association is considering premium financing, but aren’t sure where to begin when looking for a provider, contact Blue Lime Insurance Group! Our insurance experts are happy and ready to assist with finding the best solution for your HOA.