INSURANCE premium financing may be a more manageable way for you to provide coverage for your automobile.

With the ever-increasing cost of petrol burning into the pockets of motorists, along with maintenance costs, auto insurance financing allows drivers the benefit of having the total sum needed to insure a vehicle, paid over to him/her up front.

The stress of having to provide what could easily amount to upwards of $180,000 then becomes less in the harsh economic climate, insurers say.

“The process works much in the same way as a loan agreement.

The motorist enters into a contract with the lender who pays the full premium to the insurer.

The amount is then repaid by the motorist in small monthly instalments,” says Elizabeth Chung of Jamaica International Insurance Company (JIIC).

Typically, the motorist pays a deposit of 20 to 25 per cent of the cost with the contract period extending between three to eight months.

“The difference is provided by the finance company with some companies even offering 100 per cent financing,” William Nash of British Caribbean Insurance Company (BCIC) reveals.

But as with other types of loan agreements, interest is charged on the account of the motorist “in relation to the contract term selected”, Chung explains.

The longer the repayment period the higher the rate charged.

“The chief benefit to the clients is that their disposable income is freed up,” she adds.

The affordability of premium financing is also touted by Nash as its chief benefit.

He adds that insurers also benefit from increased cash flow due to the lump sum payments.

“That allows them to increase earnings from investment income and less time is spent chasing customers to collect premiums,” he says.

However, financing arrangements are not extended to all types of policies, as lenders do not finance third party policies.

“Since third party insurance policies provide cover for damages to other vehicles with no coverage for the client who is purchasing the policy, the lenders do not opt to provide financing,” Chung explains.

However, while noting the restrictions on the spending power of many individuals, the industry experts say that there has been an increase in persons opting to finance their premiums.

“Many persons are better able to manage smaller payments over longer periods given the economic climate,” Chung says, adding that there is also a growing trend for lenders who offer motor vehicle loans to also offer premium financing as part of the loan package.

“I would probably be driving without insurance, if I wasn’t able to pay my insurance through monthly installments,” 30 year-old IT technician *Mathew Lawrence says.

At $50,000 for the year to cover his 1999 Nissan Bluebird, Lawrence says after paying his $25,000 deposit, his monthly $8,000 payments have allowed him “much needed wiggle room” in his finances.

“The smaller payments not only make it manageable, they actually make it possible for me,” he says.

The interest payments required through financing options have however deterred some motorists from using the method to cover their insurance costs.

“At the end of the day, it’s going to cost more because I will have to pay the financing costs,” says *Annette Bailey, arguing that the arrangement would not suit her.

She says the instalment plan offered by her insurer allows her a similar benefit but that she understands why persons may find the smaller payments through financing more manageable.

*Names changed upon request.