We frequently see Errors and Omissions policies going into cancellation for failure to make the scheduled payments. For those of you who have an Errors and Omissions policy, this is a serious issue, and it is critical that you understand the impact it may have on you and your business.
When a new professional liability policy is issued, the carrier issuing the policy requires full payment in advance. Since premiums can be expensive, and this request can sometimes be difficult to satisfy, there are financing options made available through third party financing companies. We work with these financing companies in order to negotiate interest rates and payment plans for you. When you sign your financing agreement, you are consenting to the arranged terms. It is crucial that you adhere to the agreement with the financing company throughout the term of your loan.
Serious Consequences for Non-Payment
All defaulted and past due payments remain on your history with that financing company. When reapplying for financing the following year, these imperfections may make our negotiations on your behalf difficult. This can result in higher interest rates and higher down payments. More importantly, when your pay plan goes into cancellation status, a cancellation request gets sent directly to your insurance carrier. If payment is not made, and the pay plan is not reinstated prior to the carrier processing the cancellation request for your policy, the policy will be canceled midterm. A midterm cancellation for non-payment is not eligible for reinstatement with the carrier, and you will lose all of your prior acts/retro coverage. Coverage will have to be reapplied for with a new retroactive date assigned. Many of our clients do not understand the danger they create by going into cancellation every month.
If financing is accepted, every attempt should be made to adhere to the due dates for payments.