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Paying for Texas Commercial Auto Insurance

Businesses in Texas can pay for commercial auto insurance in various ways, including credit cards, cash, or a money order. However, most businesses settle their commercial auto insurance payments annually in full via business checks, ACH transfers, or through premium financing with a monthly or quarterly payment.

Who Pays for Commercial Vehicle Insurance?

Commercial auto insurance in Texas covers automobiles used for business activities. Hence, payments for business auto insurance are made by the business, through the business owners or their representatives. This can be a small business, a limited liability company, or any other business type.

What are the Payment Options for Commercial Auto Insurance?

Businesses can pay commercial auto insurance premiums in Texas via:

  1. A business check

  2. ACH transfers

  3. Premium financing arrangements.

All of these methods will be acceptable to insurers in Texas. If a business opts to pay via a credit card, the credit card issuer might charge an extra fee. Businesses can also choose to pay for commercial insurance premiums via premium financing, although this will be more expensive due to the interest rates charged by the premium financing company. Some commercial insurance companies may offer in-house financing, while most outsource this function.

Speak with a knowledgeable commercial insurance agent to discuss premium financing options.

Can I Finance the Commercial Auto Policy Cost?

Yes, you can. In Texas, Commercial auto insurance financing is usually offered by third-party financial companies, but in some cases the business insurance provider may be able to finance the premium in-house. Financing companies pay for the premiums upfront and then receive payments from a business with interests. Hence, financing commercial auto insurance is often a more expensive payment method. The premium financing companies have a duty to examine a company's financial health before rendering premium financing services to a business. Most Texas small businesses pay the average annual interest rate of 7.5% - 12%.

The table below illustrates the structure of premium payments for commercial auto insurance using premium financing, with the most common (2-month) downpayment:

Annual Cost of Coverage $2,000 $2,000 $50,000 $50,000
Down Payment 17% 17% 17% 17%
$340 $340 $8,500 $8,500
Unpaid Premium Balance $1,660 $1,660 $41,500 $41,500
Premium Finance Rate 7.5% 12.0% 7.5% 12.0%
Number of Monthly Payments 10 10 10 10
Estimated Monthly Loan Installment Payment $171.76 $175.27 $4,293.99 $4,381.66

Is Premium Financing Available for Commercial Auto Insurance?

Yes, premium financing is available for commercial auto insurance in Texas. Whether it is offered by third-party companies or by the insurer itself, it is often more expensive than other payment options, especially paying the annual coverage in full up front. This is because premium financing companies charge administration fees and interest rates represented as a percentage of the annual policy premiums. To get access to premium financing options and to compare the available options, speak with a state-licensed commercial insurance agent who has access to multiple premium financing providers.

How Does Premium Financing Work in Commercial Auto Insurance?

Commercial auto insurance can be expensive and unlike personal auto insurance, it is usually billed in 6 month or 12 month increments, without an easy option to pay monthly. Premium financing is when a company gets a loan to finance its insurance premium (from the insurer or a 3rd party). It ensures that the annual premium is paid in full to the insurer and the coverage can begin. The rest of the debt payments are exchanged between the business and the financing organization based on the conditions outlined in the loan - typically 7%-12% APR.

Premium financing is typically used to buy commercial auto insurance in two situations:

  • The business cannot afford to pay the annual premium in full, and needs this coverage active to continue operating the business, or if

  • The business can invest its cash flows somewhere else, with a higher rate of return than the one they will pay to finance the insurance premium, effectively getting a premium financing option for free.

Texas businesses can easily acquire premium financing by contacting the premium financing company directly, or through an insurance agent or broker. In Texas, all premium financing activity is subject to state laws as stipulated in Sec. 651.001 of the Texas Insurance Code.

Before considering premium financing, a business must consider the following:

  1. The financial ability of the business to pay back the loan taken and the accruing interests.

  2. The interest rates charged in terms of the total costs of running the business.

  3. The relevance of taking the loan and the adjoining opportunity costs.

It is however always best to consult with a Texas-licensed commercial insurance agent. Knowledgeable agents are best equipped to assess the business and determine eligibility for varying premium financing options.

How is Premium Finance Different from Other Payment Methods for Commercial Auto Insurance?

Premium Finance for commercial auto insurance in Texas differs from other payment methods mostly in the cost structure. Premium financing is usually more expensive than other payment methods primarily because of the interest rates and the administration fees charged by premium financing companies.

How Often is Commercial Auto Insurance Paid?

Businesses in Texas can make commercial auto insurance premium payments in the following structures:

  • Annually

  • Bi-annually

  • Monthly

  • Any other payment structure as agreed with their insurers and/or premium financing institutions.

Is Commercial Auto Paid Monthly or Yearly?

Businesses with commercial auto insurance policies in Texas can pay premiums either monthly or yearly depending on the agreement with their insurance companies. Most business auto insurance is paid yearly.

Can Commercial Auto Insurance Premiums be Paid Annually?

Yes, insured businesses in Texas can pay their commercial car insurance policy premiums annually. Paying premiums upfront annually gets the business the lowest possible discounted price. In fact, most insurance providers encourage annual premium payment.

Can New Commercial Auto Insurance Cover Old Bills?

No, a new commercial auto insurance policy cannot cover old bills. A commercial auto insurance policy only comes into force on the date stated in the policy contract. Therefore, if the insured business switches to a new insurer, the new insurer is not obligated to pay for losses that occurred under an old policy. Where there is secondary or overlapping commercial auto insurance, one is treated as primary, while the secondary policy provides coverage for items omitted or not fully covered by the first. Businesses are advised to speak to Texas-licensed commercial insurance agents before filing claims. The agent can assess their commercial auto insurance bills and determine under which policy to file such claims.

How Do I Send my Commercial Auto Insurance Bill?

Commercial auto insurance bills can be paid in two ways in Texas:

  1. A full payment - Businesses can make full payment towards commercial auto insurance via:

    1. Business financiers - Business financiers who may be investors, hedge funds, banks, or other investment vehicles can pay for active commercial auto insurance. The funds provided by the financier will often be recouped during profit sharing or dividend settlements

    2. Automated withdrawal from the bank - Businesses can pay commercial auto insurance premiums via automated clearing house bank transfers

    3. Mail-in - Businesses can also pay for commercial auto insurance premiums by mail-in checks

    4. In person - Business owners can write the check and give it to their insurance agent who will then get it to the insurer. During the purchase transaction, the agent acts as the insurer’s representative.

  2. Premium Financing - Premium financing is a premium payment option offered by some insurers in-house and through third-party providers. It is almost always a more expensive payment method.

Do I Pay Taxes on Commercial Auto Insurance Insurance?

No, you do not pay taxes on commercial auto insurance:

  • When making the payment, the insurance company pays tax. You pay the total premium cost quoted for the business coverage and the insurer then pays a portion of the collected payment as tax to the state of Texas.

  • When filing a claim for commercial auto insurance, the payout received from the insurer is meant to put the business in the condition where it was prior to the covered loss event. Since there is no profit, there is nothing to be taxed as such.

Is Commercial Auto Insurance Tax Deductible?

Commercial auto insurance premiums are considered business expenses and, as such, are usually tax-deductible. Discuss your business vehicle tax deductions with a licensed tax professional.

Can you Pay Commercial Auto Insurance Late?

Payments towards commercial auto insurance premiums in Texas can be made late, provided it is within the grace period stipulated by the insurance provider. Commercial auto insurance providers typically extend a grace period to insured businesses, giving them the chance to pay outstanding premiums after due dates. However, the insurer reserves the right to cancel a policy if an insured business fails to pay within the grace period.

Does Commercial Auto Insurance Have a Grace Period?

Commercial auto insurance companies in Texas usually offer a grace period. This can be anywhere between seven day and 14 days at the sole discretion of the insurance provider. It is best for business owners to review their policy contracts or consult with their commercial insurance agents to find out the grace period offered by their insurers.

Is There a Grace Period for Commercial Auto after Termination?

There is no grace period after the termination of a commercial auto insurance policy. However, the representatives of an insured business in Texas can take steps to reinstate their terminated insurance policy and pay all outstanding insurance premiums. The company’s insurance agent can assist them with the entire reinstatement process.

What to Do if you Can’t Pay for Commercial Auto Insurance

If a business cannot pay for its commercial auto insurance premiums, it is best to opt out of the current plan for a more affordable plan. But do not cancel your existing coverage until you secure the replacement, otherwise your business vehicles will be exposed and will be illegal to drive.

The business should engage the services of a state-licensed commercial insurance agent to shop for a more affordable business insurance policy. A knowledgeable agent or broker with access to multiple commercial insurers and competitive rates can assess the business insurance needs and bring in several competitive quotes to choose from.

Alternatively, premium financing is another viable option for businesses with challenges paying their commercial auto insurance premiums in Texas. However, it is essential to note that commercial premium financing almost always adds to the overall cost of coverage, typically adding 7% - 12% extra, due to administration fees and interest rates charged. New and high-risk/high-liability businesses typically pay the highest financing rates.

Speak with your commercial insurance agent about the various types of premium financing that can work for your business. An experienced commercial insurance professional has access to multiple premium financing options, for every type of business and level of coverage.

Will my Commercial Auto Lapse if I Miss a Payment?

This depends on the type of a payment a business was might miss:

  • ANNUAL RENEWAL: If the annual premium payment for a commercial auto insurance policy is missed, the policy will not lapse on its current expiration date. But if the payment in full is not made within the grace period, the policy will lapse and get canceled.


    • If an insurer's in-house premium financing is being used (monthly, quarterly, or bi-annually), as soon as any of the payments are missed, the insurer starts counting the agreed upon grace period days. If the payment is not made during this time, the coverage is typically canceled.

    • If a 3rd party premium financing is being used, the premium for coverage was already prepaid by the financing company in full and the insurer will continue coverage regardless of you being late. If you are late with a payment to the premium finance company, similar to a credit card or a bank loan, the business will be charged late payment fees. In Texas, the late fee usually starts 10 days after the default on the premium financing loan and is typically equal to around 5% of the delinquent installment. The longer a business stays delinquent, the more it will owe. The business loan will be closed only after it is paid off or discharged in the bankruptcy.