Insurance payment options in Texas vary by the insurance type and the insurance company. Policyowners are expected to pay monthly or annual premiums according to their policy's provisions or the insurance company's instructions on how and when to pay.
Depending on the insurer, policyowners can pay online (through the company's website or app), via mail, telephone, or in person. Payment may be made in full or by installments, subject to the provisions of the policy.
Standard payment methods for insurance in Texas include:
Electronic funds transfer (EFT),
Mortgagee-processed (in homeowners insurance),
Check, or money order,
Credit or debit card payment,
Cash value to cover the premium (in life insurance).
Most Texas insurers provide autopay options to make paying insurance easy. When an autopay plan is set up, the payment is sent automatically on the due date to the insurance company. Auto-pay is the most recommended way to pay for insurance, guaranteeing that the payment is never late and that the coverage is not mistakenly lost due to forgetfulness.
Generally, annual insurance payments are less expensive when compared to monthly rates for premiums. It is common for an insurance company to offer a Texas policyowner the option to pay premiums annually or monthly. If annual payment is chosen, certain discounts or lower costs on the policy's premiums may be offered, which allows the policyowner to save money.
Annual premium option is usually offered in:
Health insurance (Short-term and Supplemental policies only. ACA-compliant health insurance is paid monthly only)
Despite the discount provided by annual payment, paying a full year of premiums in advance can be hard to fit into certain budgets. Hence, the policyowner should choose the option that suits their financial circumstances.
Monthly payment is another convenient method of paying premiums. The insurer divides the premium by 12 and provides an amount due for each month. However, there is usually an installment fee or charge because processing 12 payments requires more work from the insurer than processing payment once. For example, choosing to pay monthly increases the annual cost of an average Texas auto insurance policy by $30-$60.
Monthly premium option is usually offered by:
Health insurance (ACA-compliant health insurance can be paid only on a monthly basis)
Before choosing between annual or monthly payments, you can also look into other payment options or incentives the insurance company offers. For instance, some insurance companies allow quarterly or semi-annual payments. Also, sometimes discounts are offered to clients who use a type of electronic payment preferred by the company. Check with a trusted Texas-licensed insurance professional to see which option best suits your specific needs.
It is the insurance company that determines if premiums can be paid for in cash. However, cash payment is not so common in Texas. This is because, when compared to most payment options, cash payments are harder to track.
If the company permits cash payment, the traditional method is to take the cash directly to their established and designated physical office and pay. Under no circumstances should cash be mailed. Make payment before the due date, ensure to obtain a receipt, and call the company's customer service to confirm that the payment was processed.
If you must use cash, consider exchanging it for a Money Order, prior to making the payment.
Yes, insurance premiums can be financed in Texas. Insurance premium finance is a type of financing that enables an insured to pay an insurance premium over the course of the policy's term rather than paying the premium all at once. As a lender, the insurance premium finance company advances premium payment on the insured's behalf. In turn, the insured, the borrower, makes payments to the insurance premium finance company.
In Texas, a premium finance agreement is a contract in which an insured agrees to pay to an insurance premium finance company the money advanced or to be advanced to an insurer or an insurance agent in the payment of premiums on an insurance policy.
Premium financing may help the insured achieve the following:
Remove the need to make an upfront payment of a large sum of money to the insurance provider.
Allows the insured to get the coverage needed without having to sell or cash-in other assets.
A single premium finance contract can pay for multiple insurance policies.
In the case with some indexed life insurance products, premium financing may be used to eliminate the out-of-pocket insurance costs.
While premium financing can be used for many insurance plans, it is most commonly seen in life and business insurance coverages. Premium financing allows qualified persons to borrow money from a third party to pay large insurance premiums. It enables policyholders to keep their cash flow flexible and keep their capital invested in higher-yielding assets rather than liquidating them to pay for the policy, unlike personal auto and home insurance policies, where the insured can make payments monthly or annually, as a lump sum. Annual payment of a lump sum is usually cheaper because the insured is offered discounts and payment incentives.
Licensed premium finance companies in Texas provide premium financing services to interested and qualified clients. Many insurance companies have accepted this concept, which they implement by using specific products geared to minimize collateral requirements while maximizing returns.
Premium financing is generally for individuals or businesses with a considerably high net worth that need insurance protection. It enables them to finance premium payments in a way that does not disrupt their other appreciating assets. This strategy can work if the interest on the loans is less than the appreciation your clients anticipate earning on their other assets.
For businesses, while commercial insurance is important, the policies are mostly expensive. They add to the business' already high overhead expenditures. This makes paying premiums difficult, particularly with the company having limited cash flow and needing to reinvest profits. This is why premium financing is an appealing solution for businesses. It allows a company to obtain its required coverage without incurring the high upfront expenses connected with a policy. Commercial insurance bills the lowest (annual) cost up front. If you want to break the annual amount into multiple payments, you usually have to finance it.
The interest rate for premium finance can be anywhere from 3-20%, depending on your credit and your insurance history, so make sure to check if the math adds up in your favor.
Generally, financing insurance policy premiums should give a client a better internal rate of return than paying premiums out of pocket. This varies significantly depending on the loan conditions, the performance of non-liquidated assets, and the point at which the loan is repaid. The loan interest is usually paid once every year, and the loan amount can be repaid at any time.
In the case of life insurance, the loan usually gets paid at the client's death, using the portion of the death benefit to repay the loan, and the remainder going to the insured's beneficiaries.
After the due date of the premium, most Texas insurance policies provide a grace period. The grace period is the amount of time that the policyowner has after the premium due date to pay the premium before the policy lapses. Within this grace period, a policyowner can make a late payment without incurring interest and still be insured. Rule §3.5106 of the Texas Administrative Code provides that for life, accident, and health insurance, the insurer in Texas should grant the policyholder a 31 days grace period.
Coverage continues during the grace period, unless the policyholder gives the insurer written notice of discontinuation in advance of the date of discontinuance and in line with the provisions of the policy.
The grace period is to protect the policyowner from an unintended policy lapse. In the case of life insurance, if the insured dies during the grace period, the late premium is deducted from any insurance payout. Thus, the beneficiary receives the death benefit minus the past due premium.
A lapsed policy can be reinstated using the reinstatement provision. After a policy has lapsed, the maximum time limit for reinstatement of a policy in Texas is usually five years.
Do not let your insurance coverage lapse due to a late payment. Talk to a Texas-licensed insurance professional to discuss your options.
Late insurance payments do not affect a person's credit in Texas, as long as they are eventually paid and do not make it to a collection agency. Insurance companies do not report premium payment defaults to the credit bureau, but bill collectors might.
Insurance premium payments fall into the category of everyday bills that do not affect a person's credit score.
Although late insurance payments do not affect your credit score, policyowners are advised to pay premiums promptly. This is because the insurance company can penalize in other ways. This includes higher premiums at renewal, fines, late payment charges, or cancellation. For instance, a person's insurance rate can increase by 25% or more for non-payment.
While a person's insurance payment record does not affect their credit score, their credit score affects the insurance premium rates that the insurer offers to them. The insurance company generally looks at:
The number of open accounts owned by the person.
Their debt compared to their available credit.
Any previous late payments.
How often do they submit applications for new lines of credit.
If the insurer sends the bill to a collection agency, the collecting organization may post negative information to your credit file. Avoid getting your bills to this stage, as this negative mark can be hard to remove and it can follow you for multiple years.
The insurer may also look at the person's driving history, claims history, and other related factors in determining their score. Individuals with low credit scores usually cost insurance companies more money. This is why insurance companies charge these individuals higher premium rates.