Some insurance brokers charge extra for monthly payments, and some don’t.
Are the ones not charging extra automatically better?
Are the ones charging extra just greedy?
Interesting questions, and definitely worth looking at when you’re comparing trade insurance quotes.
Before we get started, yes it does cost extra to pay monthly with Trade Risk. There are important reasons for this, which we’ll cover below.
Why do some brokers charge extra for monthly payment?
There’s a very simple answer to this – cash flow.
Put it this way:
If you did work for a customer today, and they wanted to pay you in twelve monthly instalments, with no interest, would you accept?
Of course you wouldn’t!
It would kill your cash flow.
As insurance brokers we predominantly get paid via commissions. When you take out a policy and pay annually, we get paid a commission shortly afterwards to cover our work.
In theory we could allow you to pay monthly at no extra cost, but then the insurance companies would drip-feed our commission in line with your payments.
Say the commission on your policy was $100. If you paid annually, we’d receive the $100 shortly afterwards.
Like any business, we need this money to pay our staff, our rent and all of the other expenses involved in running a business.
If we allowed you to pay monthly, the insurance company would split our $100 commission over your 12 monthly payments.
This would mean the work we did today would not be fully paid for up to a year.
If we went down this path, we simply wouldn’t have the cash flow to support the high level service that we offer to our clients.
But some brokers are offering monthly at no extra cost!
It’s true, there are some brokers offering monthly payments at no extra cost.
This is typically at the smaller end of the spectrum in terms of premiums, which is where the majority of tradies sit.
So how can they offer this?
Well it’s unlikely they are doing it just to be nice to you!
They may be willing to take a hit on cash flow in order to win more new clients. There’s nothing wrong with that, but it may mean they have to cut corners on service levels.
The other common situation is that they simply charge higher premiums overall to make up for the shortfall.
That’s why it’s so important to look at the overall cost of the insurance when going monthly.
Another broker may be offering monthly payments at no extra cost, but if the overall cost is still lower with Trade Risk, why wouldn’t you go with us?
We don’t pocket the extra!
So if you do choose to go with Trade Risk and pay a little extra to go monthly, does this mean Trade Risk pockets the extra cash?
Absolutely not.
The monthly payments are arranged via a facility known as premium funding.
A premium funding company agrees to pay the insurer the full premium upfront (which means we get paid upfront too) and you then repay the funder over twelve monthly repayments.
It’s a great system which allows our clients to pay monthly, and us to manage our cash flow without cutting corners on service quality.
Whilst we don’t pocket the full extra, we do get paid a small commission by the premium funding company.
It does take us a little more time to process a monthly payment contract compared with an annual payment, and this little extra commission covers the extra work.
It’s your choice
Ultimately it’s up to you whether you want to pay a little extra each month to use Trade Risk.
We don’t put ourselves out there as the cheapest budget cover for tradies. Instead we put ourselves out there as the trade insurance experts providing industry leading service.
Aiming to be the best means not skimping on having great systems and staff, and that costs money.
Whilst we still aim to offer super competitive premiums, we can’t cut into our cash flow, and therefore we have to charge that little bit extra for monthly payments.
We hope you understand, and most importantly we hope you agree with thousands of other tradies who choose Trade Risk.
