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Paying for Texas Commercial Liability Insurance

Commercial liability insurance in Texas, such as General Liability policy (GL), Commercial auto liability, Professional liability and others is paid either in full directly to the insurer or through the use of premium finance via 3rd party premium financing. The insurer is paid in full in either case, which allows for the needed coverage to begin, but the remaining payment structure depends on the chosen method. Some, usually very large commercial insurers may offer internally-financed payment options.

Who Pays for Commercial Liability Insurance?

In Texas, payment of commercial insurance premiums is done by the business’ representative who is authorized to make payments on the behalf of the business. For small businesses, it is the responsibility of the owner (policyholder) of an insured business. For instance, the responsibility lies with small business owners who operate sole proprietorship structures. However, for business structures like general partnerships, Corporations, Limited Liability Companies, Limited Partnerships, or Limited Liability Partnerships, such responsibility is usually assigned to a department.

What are the Payment Options for Business Liability Insurance?

Business owners in Texas can pay for their business liability insurance by making use of the following methods:

  • Making an in-person payment at an insurer’s office with cash, check, credit cards, or money order,

  • By sending a check or money order to an insurer,

  • Making online payments with a debit or credit cards,

  • Using phone calls to make payments.

  • Premium financing

Can I Finance the Business Liability Insurance Cost?

Yes, you, as a business owner can finance your business liability insurance to protect your business assets. For example, a small business owner can finance their general liability coverage cost via premium financing. Speak to your Texas-licensed commercial insurance agent if you intend to use the services of a third-party premium financing company. It is also possible to use premium financing to pay for other business insurance coverages like commercial auto and commercial property insurance in Texas.

Is Premium Financing Available for Commercial Liability Insurance in Texas?

Yes, premium financing for business liability insurance is available in Texas. Premium financing is particularly good for businesses that want to avoid paying for insurance from their operating capital. Although taking a loan to pay insurance premiums is more expensive (usually 8% to 10% extra) due to the interest rates charged by premium financing firms, it can be beneficial in the long run. For instance, small business owners who find it difficult to pay for their commercial general liability insurance coverage in lump-sum can consider using premium financing. Business owners should consult with licensed commercial insurance agents to help find the best available premium financing firms in their locality.


Example of Costs With Premium Financing through a third Party Vendor

Annual Cost of Coverage

(including all fees)

$6,000 $6,000 $120,000 $120,000
Down Payment 15% 15% 15% 15%
$900 $900 $18,000 $18,000
Unpaid Premium Balance $5,100 $5,100 $102,000 $102,000
Premium Finance Rate 7.50% 12.00% 7.50% 12.00%
Number of Monthly Payments 10 10 10 10
Estimated Monthly Loan Installment Payment $528 $538 $10,554 $10,769
Total Paid For Coverage $6,177 $6,285 $123,539 $125,694

How Does Premium Financing Work in Business Liability Insurance?

In Texas, premium financing works as outlined in Chapter 651 of the state’s Insurance Code. Premium financing is a loan agreement where the financing firm agrees to pay premiums to an insurance company on behalf of an insured, who will repay the firm with interest.

When paying for business liability insurance in Texas through financing:

  • The premium financing firm will pay the cost of the business liability insurance directly to the insurer

  • The insured business will then reimburse the premium financing company, with interest, at a stipulated date

Using the services of a premium financing firm is more expensive for a business than paying from the business’s purse since it will have to repay with interest. Contact a licensed commercial insurance agent to better understand how premium financing works in Texas. They can also help a business find a premium financing company with a relatively affordable rate.

How is Premium Finance Different from Other Payment Methods for Business Liability Insurance?

Premium financing is the only alternative to paying for commercial coverage for the whole term in full. The following are some ways commercial liability insurance financing in Texas is different:

  1. Flexibility: Commercial liability insurance payments are made more flexible due to premium financing. A business may opt to pay premiums yearly, monthly, or through any other payment structure acceptable by the premium financing company

  2. Payment Structure: Premium financing is a more costly method of paying premiums because financing companies charge interests on financed premiums

How Often is Commercial Liability Insurance Paid?

While all commercial insurance in Texas is typically paid in full, if the business chooses to use premium financing, it can pay for its business liability insurance premium:

  • monthly,

  • bi-annually, or

  • within any time frame as may be stipulated in the premium financing contract

Is Business Liability Insurance Paid Monthly or Yearly?

In Texas, a business can pay for its business liability insurance either monthly or yearly. However, it would most likely cost less if the business chooses to pay yearly, as monthly rates will not be applied.

Can Business Liability Insurance Premiums be Paid Annually?

Yes, an insured business can pay its business liability insurance premiums annually. Paying annually can earn a business some discounts on its insurance premium. Speak with a Texas-licensed and knowledgeable commercial insurance agent to discuss your premium payment options.

Can New Business Liability Insurance Cover Old Bills?

New business liability insurance in Texas will not pay for past-due bills. If a business purchases a policy from an insurance company, the new policy cannot cover incidents that happened before it went into force. For example, if a home improvement contractor purchases a new professional liability insurance policy, it cannot cover bodily injury and property damage caused by the contractor’s negligence before the policy came into effect. The policy that pays for the covered liability is determined by the date a covered liability occurred. The business liability insurance that was in force at the time of the event will bear such payment. If two policies overlap, the first is treated as primary, while the second covers what the first could not. For further policy-specific information on bills payment, the representatives of an insured business can speak with a Texas-licensed commercial insurance agent.

How Do I Send my Commercial Liability Insurance Bill?

In Texas, commercial liability insurance can be paid for in two main ways: Full payments and Premium financing.

  1. Full payments: In Texas, a business can choose to pay its commercial liability insurance all at once. This is typically done via:
  • Automated bank payments: Automated bank payments are normally made through scheduled bank transfers, credit cards, or debit cards

  • Mail: Insured business owners or their representatives can send checks through the mail to their insurer to settle their business liability insurance bills

  1. Premium financing: A business can make their commercial liability insurance payments by using a financing company to pay the premiums. Premium finance companies are independent organizations that, after evaluating a company's financial situation, may choose to provide their services.

Do I Pay Taxes on Commercial Liability Insurance?

No, there are no taxes due from the insured during the purchase of insurance coverage. The insurer pays a portion of the collected payment as tax to the state of Texas.

Business liability insurance covers property damage caused by a business or injuries sustained by clients on a business property or after using products bought from them. This means the money received from a business liability insurer in Texas is not taxable because an insured business will most likely not profit from it. However, if there is a profit from the compensation, such a business is obligated to pay tax and can use the IRS Form 1099-MISC, Miscellaneous Income in filing such tax.

Is Business Liability Insurance Premium Tax Deductible?

Yes, business liability insurance premium in Texas is tax-deductible. It can be deducted from a business’s taxable income because the Internal Revenue Service (IRS) considers business liability insurance as a cost of doing business. It is advisable to engage a certified tax professional when determining a business’s tax deductions.

Can you Pay Business Liability Insurance Late?

Yes, an insured business can pay for its business liability insurance coverage late as long as it pays during the grace time specified in its policy document. Most business liability insurance companies provide a grace period to enable insureds to settle unpaid insurance premiums, usually 30 days long. An insurance company reserves the right to terminate an insured business’ liability policy if after the grace period such business fails to pay its outstanding premium.

Does Business Liability Insurance Have a Grace Period?

Yes, business liability insurance in Texas has a grace period. For most insurers, grace periods range between 20 to 30 days.

What is a Grace Period in Business Liability Insurance?

In business liability insurance, a grace period is a window offered to insured businesses to enjoy coverage after their premium due date without penalties. Grace periods in Texas protect policyholders from losing coverage whenever there is a delay in premium payment.

Is There a Grace Period for Business Liability Insurance after Termination?

In Texas, there is no grace period once an insurer cancels business liability insurance coverage. An insured business can reinstate its terminated policy if it still has needs for coverage.

What to Do if you Can’t Pay for Business Liability Insurance

If an insured business cannot pay for its business liability insurance, the best option is to opt out of the current plan and go for a more affordable one. When looking for a more affordable plan, ensure to consult with a Texas-licensed commercial insurance agent. Alternatively, a business can explore the option of paying through insurance premium financing if it has a repayment means.

Will my Business Liability Insurance Lapse if I Miss a Payment?

Typically, if an insured business in Texas does not pay its business liability insurance premiums when due, coverage will not lapse immediately. However, If it fails to pay within the insurance provider's grace period, the policy will lapse.

If you have further questions about commercial liability insurance, speak with a licensed and knowledgeable commercial insurance agent.