With Australian small businesses facing increased costs across the board, premium funding offers a solution to paying your insurance premiums that allows you to reduce cash outlay upfront. Essentially a short-term loan, a premium funding arrangement allows businesses to spread the cost of your annual insurance cover across smaller instalments instead of paying a lump sum upfront.

This gives businesses greater flexibility and, importantly, ensures business owners can afford the cover they need while using their cash for other important expenses, such as investing in stock or wages. The four most commonly cited premium funding benefits include:

  • retaining cash flow
  • ability to provide better service
  • enables reinvestment into the business
  • simplifies insurance payments.

Case study: The benefits of premium funding for operational investment

A food producer needed to purchase ingredients from overseas and by using premium funding for their business insurance cover they retained the cash flow to instead buy stock in bulk at a discounted price. They also saved money on the transit costs of importing bulk goods.

They secured the product they needed and the savings realised far outweighed the interest on their premium funding arrangement.

Can I tailor the frequency of my premium repayments to suit the business?

Through Monument Premium Funding your broker can access many different competitive loan structures from monthly or fortnightly repayments to quarterly or even biannually. You can choose the instalment terms that work for you.

Businesses can nominate the period of the premium funding loan, bearing in mind that the interest rate charged is influenced by the total period of the repayment schedule and the number of repayments involved, but remains fixed at the agreed rate. Interest rate costs are tax deductible for most commercial loans.

Repayments can be made via direct debit, credit card or with BPAY, and you can select the date that works best for your cash management.

How insurance premium funding can assist a range of business models and industries

Premium funding can be applied to diverse policies such as strata insurance, commercial or residential property cover, directors and officers' liability or workers compensation premiums Australia wide, for businesses of any size.

In the case of workers compensation premiums we pay the workers compensation cover provider the entire premium so our clients can take advantage of the discounts available for upfront payment but can still repay the cost in instalments.

Additionally, to facilitate convenient cash flow management, the repayment plans for multiple policies can be combined into a single contract which can include all of the business's commercial and domestic policies.

Businesses have the flexibility to add extra components or endorsements to the premium funding loan throughout the year. If you buy a new vehicle or plant and equipment, or add a new location to your policies, the additional premiums can be added to your existing loan contract.

Similarly if you sell an insured asset the returned premium can be deducted from your bundled loan balance, reducing your debt.

Would an insurance premium funding arrangement work for you?

No additional security is needed to access premium funding, the policy is the surety or security, and the arrangement has no impact on other existing loans or financial lending facilities.

If you're an existing Gallagher business insurance client and you haven't been given a premium funding quote with your insurance renewal — or with your new business insurance policy — you can be provided with a quote on the same day it's requested, and a premium funding contract can be processed and approved within 24 hours (unless further information is required).

Learn more about premium funding and other key small business insurance tips and insights.

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Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient's industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers' control.

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