Premium Finance

Ironwood Fabrication LLC, a 22-employee metal shop in Ohio, renewed a commercial package policy bundling general liability at a $1,000,000 per-occurrence and $2,000,000 aggregate limit, building and equipment coverage of $850,000 with a $5,000 deductible, and a separate workers' compensation premium of $18,400. The total annual premium came to $48,600 — far more cash than the owner wanted to hand over on July 1. Instead of paying in full, Ironwood used a premium finance agreement: a third-party lender paid the carrier the entire $48,600 up front, Ironwood put down 20% ($9,720), and the remaining $38,880 was financed.

At a 9.25% APR the lender added a finance charge of $1,712, so Ironwood repaid $40,592 across ten level installments of roughly $4,059 each. When the shop later missed the November payment, the finance company sent an intent-to-cancel notice; the carrier issued a cancellation notice using the power of attorney in the finance contract. A slip-and-fall claim that same week produced a $120,000 liability payout — covered only because Ironwood cured the default with a $75 reinstatement fee before the cancellation date.

Had the policy actually cancelled mid-term, the carrier would have returned the unearned premium — about $6,300 after a short-rate penalty and the $2,700 minimum earned premium — straight to the lender to offset the $38,880 loan balance.