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Texas insurance glossary

Premium finance

Premium finance is a loan that pays your insurance premium up front so you can repay it monthly, arranged through a company licensed separately from the insurer.

Sources checked

A down payment and monthly instalments is frequently not the insurer spreading the cost — it is a finance company paying the insurer in full and lending you the balance, with interest and fees on top.

That structure is why a missed instalment can end a policy quickly. The finance agreement usually authorises the company to cancel the policy and take the unearned premium back, so the cancellation comes from the lender rather than from the insurer.

Paying the term in full avoids it entirely, and on a six-month policy period the saving is often larger than it looks.

Sources: Texas Insurance Code ch. 651 — Insurance Premium Finance Companies; TDI — consumer bill of rights for personal automobile insurance (CB005); TDI — home insurance glossary. Verified .

A definition, not legal advice and not a quote. Rules and figures change; confirm your own situation against the source named above, or with us, before you act on it. Last checked .

See also

  • Premium A premium is the amount charged for an insurance policy for a stated term, calculated from a carrier’s rates as filed with the Texas Department of Insurance.
  • Cancellation A cancellation is the termination of a policy during its term, by the insurer or by the policyholder, rather than at the end of the term.
  • Lapse A lapse is any period with no auto policy in force, whether the policy was cancelled, not renewed, or simply never paid.
  • Policy period The policy period is the span of time the coverage runs for, shown on the declarations page as a start date and an end date with times attached.
  • Non-standard auto Non-standard auto is the market segment for drivers the preferred market declines or prices badly, after tickets, at-fault crashes, a lapse, or no prior insurance.

Where this is handled

Knowing what a coverage is called is not the same as knowing what is on your policy. One independent agency can read your declarations page with you and compare the markets that will write your record.

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