Offering premium financing as an independent insurance broker doesn’t require a new license, new software, or a complex onboarding process. In most states, your existing producer license is all you need. What it does require is understanding the basics of how premium finance works, knowing when to offer it, and choosing the right finance partner. This guide walks you through the entire process — from first client conversation to first funded loan.
Premium financing is already widely used across commercial lines. The brokers who offer it consistently earn more per account, retain more clients at renewal, and position themselves as advisors rather than order-takers. The barrier to entry is lower than most brokers assume.
What does it mean to “offer” premium financing?
When a broker offers premium financing, they’re acting as an arranger — connecting their commercial client with a premium finance company (PFC) that will fund the policy premium. The broker doesn’t lend the money themselves. They introduce the option, facilitate the application, and in most states earn an arranger fee — a commission paid by the lender for originating the finance agreement.
The broker’s role is light-touch but valuable: you present the option, the client signs a finance agreement, the PFC pays the insurer, and the client repays the PFC in monthly installments. The policy stays fully in force throughout.
Step 1: know when to offer it
Premium financing isn’t necessary for every account, but it’s worth raising any time a client faces one of these situations:
- Large annual premium: Any commercial account over $10,000 annually is a candidate. The larger the premium, the more meaningful the cash flow benefit.
- Budget pressure at renewal: If a client mentions the number is higher than expected or asks about payment options, that’s your opening.
- Multiple policies binding at once: A new business or growing company that is placing several lines simultaneously faces a large upfront outlay — financing can solve that in one step.
- Startup or limited working capital: Early-stage businesses often have strong revenue but tight cash. Financing preserves liquidity without reducing coverage.
- Significant rate increase at renewal: When the premium jumps 15–40% year over year, financing softens the blow and reduces the chance the client shops or reduces coverage.
Step 2: get appointed with a premium finance company
To offer premium financing, you’ll need to work with a licensed premium finance company in your state. The appointment process varies by lender but typically involves:
- Submit your agency profile: Name, producer license number, and the states where you write commercial business.
- Review and sign a broker agreement: This outlines the terms of the relationship, including how arranger fees are paid and the states where they’re permitted.
- Complete a brief onboarding call: Some lenders require this; others skip it entirely for digital platforms. Expect 15–30 minutes to get familiar with the quoting tool.
- Receive credentials and start quoting: Once approved, you’ll get access to the platform and can generate your first quote same-day.
With modern platforms like Patch, appointment is fast — often same-day — and you can start quoting immediately after. There are no volume minimums or complex credentialing requirements for most brokers.
Step 3: have the conversation with your client
Most clients don’t know premium financing is an option. Your job is to introduce it naturally as part of the renewal or new business conversation. A simple framing that works:
“Rather than paying the full annual premium upfront, you could spread it into monthly payments. There’s a small financing cost, but many of our clients find it’s worth it to keep that capital in their business.”
Keep it simple at first. If the client is interested, walk them through the specifics — down payment, monthly installment amount, total financing cost. Most premium finance platforms generate a quote in seconds that you can share with the client directly.
Step 4: generate a quote and present the numbers
A premium finance quote shows the client exactly what financing their policy will look like:
- Total premium financed: The amount being funded by the PFC — typically the full annual premium minus the down payment.
- Down payment required: Usually 20–25% of the total premium, paid directly to the insurer at binding.
- Monthly installment amount: What the client pays each month for the term of the agreement, typically 9–10 months.
- Total financing cost: The interest and any applicable fees the client pays over the life of the agreement — this is what makes the comparison to paying upfront transparent.
Presenting these numbers side-by-side with the upfront option makes it easy for clients to decide. In most cases, the total financing cost is a small percentage of the premium — a reasonable trade for cash flow flexibility.
Step 5: get the finance agreement signed
Once the client decides to finance, they’ll need to sign a premium finance agreement — a legal loan document between the client and the PFC. Modern platforms handle this digitally. The client can review and e-sign in minutes, often on their phone.
Key items the client is agreeing to:
- Repayment schedule: The installment amounts, due dates, and total number of payments for the term of the agreement.
- Automatic payment authorization: Most PFCs require ACH authorization so payments are collected automatically each month.
- The cancellation provision: If the client misses payments and the default isn’t cured, the PFC has the right to cancel the policy and recover the unearned premium from the insurer. This is the most important item to explain clearly.
Make sure your client understands the cancellation provision before signing. Missed payments can result in policy cancellation, which is bad for everyone.
Step 6: the PFC funds the policy
After the agreement is signed, the premium finance company pays the insurer the full premium — typically within 24–48 hours. The policy binds normally, and your client is fully covered from day one. From the insurer’s perspective, it’s a paid-in-full policy.
Understanding your arranger fee
In most states, brokers earn an arranger fee — a commission paid by the premium finance company for originating the loan. This is separate from your regular broker commission and is paid on top of it. Arranger fees typically range from 1–3% of the financed premium amount, though this varies by state regulation and lender.
For example, on a $50,000 financed premium with a 2% arranger fee, you’d earn $1,000 — in addition to your standard carrier commission. Multiply that across your book of business, and it becomes a meaningful revenue line.
Arranger fee regulations vary by state. Some states cap the amount, require specific disclosures, or have other requirements. Your PFC should keep you informed about what’s permissible in each state where you write business.
Choosing the right premium finance partner
Not all premium finance companies are equal. When evaluating a partner, look for:
- Competitive base rate: The lower the PFC’s rate, the better the deal for your client — and in states that permit arranger fees, more room for you to earn on the transaction.
- Fast digital workflow: Same-day quotes, digital agreements, and rapid funding. Anything that requires faxing PDFs or manual back-and-forth will slow you down.
- Clear arranger fee structure: The PFC should be transparent about what fees are permissible in your licensed states and how they’re paid.
- Responsive broker support: When a deal has a tight bind date or a client has a question, you need a partner who picks up the phone.
- Licensed in your key states: Confirm the PFC is licensed and actively writing business in the states where most of your commercial accounts are placed.
Patch is built specifically for independent insurance brokers — with a fast digital workflow, same-day funding capability, and transparent fee structures across all supported states.
Frequently asked questions
Do I need a separate license to offer premium financing?
In most states, no. Your producer license covers the arrangement of premium financing. A small number of states have additional requirements — your PFC should advise you on your specific state.
How much can I earn in arranger fees?
This varies by state and lender, but 1–3% of the financed premium is typical. On a $100,000 book of financed premiums, that’s $1,000–$3,000 in additional revenue above your standard commissions.
What happens if my client doesn’t make their payments?
The PFC will issue a notice of cancellation to the insurer and recover the unearned premium. The client loses coverage. This is why it’s important to ensure clients understand the repayment obligation before signing.
Can I offer financing on any policy?
Premium financing works on virtually all commercial lines policies that are cancellable — which is the vast majority. Your PFC will confirm eligibility for specific policy types and carriers.
How quickly can my first deal fund?
With a modern platform, from client signature to funding can happen in under 24 hours. Same-day funding is available in many cases for time-sensitive bindings.
