Paying for Business Interruption Insurance in Texas
You can pay for your business interruption (BI) insurance in Texas with a credit card, cash, check, or money order. Most commonly it is paid via a business paper check or through a direct bank withdrawal (ACH).
Who Pays for Business Interruption Insurance?
The policyholder of an insured business is solely responsible for the payments of BI insurance premiums in Texas. The policyholder, in this context, can mean varying entities depending on the nature of the business. For example, in sole proprietorships, the responsibility will rest with the business owner. However, in other business types like the general partnerships, Corporations, Limited Liability Companies, Limited Partnerships, or Limited Liability Partnerships, a department may be saddled with ensuring that premium payments are never missed.
What are the Payment Options for Business Interruption Insurance?
In Texas, the representatives of insured businesses can pay for business interruption insurance covers using credit cards, debit cards, or cash as acceptable by the insurer.
Can I Finance the Business Interruption Insurance Cost?
Premium financing services for business interruption insurance in Texas are offered by third parties. However, the third-party premium financing company has a right to determine the eligibility of a business for premium financing depending on the financial health of the business. Usually, the premium financing company will assess the financial position and strength of the business before approving any requests to finance business interruption insurance. Consider the table below illustrating the cost structure when a business uses premium financing for BI Insurance.
| Annual Cost of Coverage | $4,000 | $4,000 | $100,000 | $100,000 |
| Down Payment | 17% | 17% | 17% | 17% |
| $680 | $680 | $17,000 | $17,000 | |
| Unpaid Premium Balance | $3,320 | $3,320 | $83,000 | $83,000 |
| Premium Finance Rate | 7.5% | 12.0% | 7.5% | 12.0% |
| Number of Monthly Payments | 10 | 10 | 10 | 10 |
| Estimated Monthly Loan Installment Payment | $343.52 | $350.53 | $8,587.98 | $8,763.31 |
Is Premium Financing Available for Business Interruption Insurance?
Yes, premium financing options are available to businesses operating in Texas. Premium financing is made available by third-party premium financing companies and is usually more expensive than paying premiums in the usual way. An administration fee and an interest rate are charged as a percentage of the annual policy premiums. If a business cannot obtain premium financing services from its insurer, the commercial insurance agent will advise on the third-party premium financing options.
How Does Premium Financing Work in Business Interruption Insurance?
Premium financing in Texas is done as outlined in Sec. 651.001 of the Texas Insurance Code. Premium financing companies must equitably provide insurance financing to clients without discrimination. Essentially, premium financing is a loan offered to businesses to cover the cost of insurance premiums. The premium financing company will charge an interest rate on the loan provided. If any business is considering financing its business interruption insurance, consulting with a Texas-licensed commercial insurance agent for guidance is advised. An agent will assess the business and determine its eligibility for premium financing.
How is Premium Finance Different from Other Payment Methods for Business Interruption Insurance?
Business interruption insurance financing in Texas differs from other payment methods in the following ways:
Flexibility: Premium financing makes insurance payments more flexible for businesses. A business may choose to pay premiums annually, monthly, or any other payment structure permitted by the financing company,
Cost structure: Premium financing is a more expensive option to pay premiums with because the premium financing company will charge interest on the loan offered to the business.
How Often is Business Interruption Insurance Paid?
A business may pay for its business interruption insurance policy premiums in Texas using any of the following payment structures:
Annual payment
Bi-annual payment
Monthly payment
Any other payment structure stated in the policy contract
Is Business Interruption Paid Monthly or Yearly?
In Texas, businesses can pay their business interruption insurance premiums either yearly or monthly. Annual payment is the default method, while monthly or any other split payment options must be arranged with the premium financing company.
Can Business Interruption Insurance Premiums be Paid Annually?
Yes, a business can pay its business interruption insurance premiums in Texas annually. Most insurers prefer premium payments to be made annually and often offer discounts for this payment structure.
Can New Business Interruption Insurance Cover Old Bills?
No, a new business interruption policy cannot cover old bills in Texas. A policy comes into force on the date stipulated in the policy document. Hence, if a business switches to a new insurer, the new insurer or policy will not pay for losses that occurred under an old business loss insurance policy.
When there is a secondary (overlapping) business interruption insurance policy, one is treated as primary, while the second covers areas omitted by the first one. It is advised that the representatives of a business speak with a Texas-licensed commercial insurance agent to assist them with filing claims whenever an insured event occurs to ensure quick pay-out before their policy term ends.
How Do I Send my Business Interruption Insurance Bill?
Business interruption insurance is usually paid via two methods in Texas:
Full Payments: A business can opt to make one-time annual payments for BI insurance premiums in Texas. This can be done through:
A business Financier - A financier of a business such as a bank might require business interruption insurance to ensure the safety of invested funds. Often, the financier will make payments on behalf of the business, and the business reimburses it during profit sharing or dividend settlements
Automated withdrawal from the bank - Businesses can also pay business interruption insurance premiums as a scheduled bank transfer (ACH - Automated Clearing House)
Mail - It is possible to pay business interruption insurance premiums via paper checks sent through the mail. A lot of small business owners prefer to send in the payment to the premium financing organization using business checks, making it easier for the accountants to track.
Premium Financing Arrangements - A business can make payments towards BI insurance premiums, through a financing company. Premium financing companies are third-party entities and offer their services at their discretion after examining the financial health of a business.
Do I Pay Taxes on Business Interruption Insurance?
The compensation received from a business interruption insurance policy is meant to cover revenue that the business would have earned if the business had not suffered any form of interruption. If the business had not suffered any losses or disruption in its revenue stream, it would have paid taxes on all earnings. Hence, business interruption insurance is taxable in Texas.
On the other hand, you also do not pay sales taxes when buying business interruption coverage. The insurer pays a tax on the money they receive from your business, but not the other way around. There is no sales tax on business interruption insurance.
Is Business Interruption Insurance Tax Deductible?
Business interruption insurance premiums count as expenses to businesses in Texas and are normally tax-deductible.
Make sure to discuss the tax implications of your commercial insurance coverage with licensed accounting professionals.
Can you Pay Business Interruption Insurance Late?
Yes, provided that the premium annual payments are made within the grace period as stipulated by your insurance provider. Commercial insurance providers in Texas usually offer a grace period for businesses to pay outstanding premiums. Once the grace period has elapsed and your business interruption annual insurance payment has not been made, the insurer reserves the right to cancel the policy.
Does Business Interruption Insurance Have a Grace Period?
Yes, business interruption insurance in Texas has a grace period. The most common grace period for business interruption insurance in Texas is 30-31 days. However, the time window for the grace period is determined by the insurer at their sole discretion. It can be a month long or a few days, so make sure to read the fine print of the contract and confirm the term with your agent.
What is a Grace Period in Business Interruption Insurance?
A grace period in business interruption insurance is a time offered by insurers to allow a business to pay its outstanding premiums after the due date without imposing any penalty. In Texas, grace periods prevent businesses from losing insurance coverage owing to delays in premium payments. Once the grace period elapses, the insurer can cancel the policy.
Is There a Grace Period for Business Interruption Insurance after Termination?
There is no grace period once a business interruption insurance policy has elapsed in Texas. To regain business interruption insurance coverage, representatives of the business must contact the insurance company to reinstate the policy and make payments of outstanding premiums.
What to Do if you Can’t Pay for Business Interruption Insurance
If a business cannot pay its business interruption premiums, it may be best to opt for a more affordable plan. The representative of a business can consult with a Texas-licensed commercial insurance agent to find a more affordable policy if the business has challenges paying for the current one. Alternatively, the business can opt for premium financing. However, this can cost up to 15% in annual interest.
Will my Business Interruption Lapse if I Miss a Payment?
A business interruption insurance policy will not lapse if a business misses payment but is still within the grace period offered by the policy provider. However, once the grace period has elapsed and payments have not been made, the policy will lapse.
