7 min read · Updated . Reviewed by James Rock (National Partnerships Director).
On this page 11
- What is insurance premium funding?
- How does premium funding work?
- What do premium funding loans look like?
- What happens if you miss a premium funding repayment?
- What happens if you miss a monthly premium payment?
- What does paying by the month cost?
- Premium funding vs paying monthly: side by side
- Why does the difference matter for financed equipment?
- What does premium funding cost?
- When is premium funding the better option?
- Want to pay monthly without taking on a loan?
What is insurance premium funding?
Insurance premium funding, also called insurance premium finance, is a loan that pays a business’s insurance premiums up front. The business then repays the lender in instalments, with interest, usually over 10 to 12 months.
Westpac says its insurance premium finance “acts like a short-term loan that lets you spread annual insurance premiums”. Dynamoney describes the same structure: it pays the premium on your behalf, and you repay it over 10 or 12 monthly instalments, with policies from different insurers combined into “one loan”.
How does premium funding work?
| Step | What happens |
|---|---|
| 1 | Your insurance is quoted and accepted, often several annual policies at once |
| 2 | You sign a loan agreement with a premium funder |
| 3 | The funder pays the premiums to the insurers in full |
| 4 | You repay the funder in fixed monthly instalments, with interest |
| 5 | At renewal, the policies are re-priced and a new loan usually starts |
What do premium funding loans look like?
Two lenders’ public product pages (October 2026) show the typical shape:
| Feature | Westpac | Dynamoney |
|---|---|---|
| How it’s described | “Acts like a short-term loan” | Funding repaid in monthly instalments, “one loan” for several policies |
| Term | 6 to 12 months | 10 or 12 monthly instalments |
| Amount | Yearly premiums of at least $5,000 | Premiums from $1,000 to $5 million |
| Business history | Not stated on the product page | An active ABN, typically at least 24 months old, and a satisfactory credit assessment |
| Security | A security interest in the policy. Under $350,000, often no additional security; over $350,000, a directors’ guarantee may be required | The policy itself. No property security or directors’ guarantees |
| Fees | An establishment fee, with no monthly account fees | No ongoing loan service or security fees once the agreement is repaid |
Neither page publishes an interest rate; Westpac says rates are set for each business. Ask for the total amount payable and compare it with paying the premium outright.
What happens if you miss a premium funding repayment?
Westpac’s published general terms set it out. You grant the lender “a security interest in each policy” to secure what you owe. If a repayment is missed, it gives you at least 30 days’ notice before enforcing the default. After that it can require payment of everything you owe, and “sue you for unpaid amounts, enforce any security interest or guarantee given to us as security for this document, cancel or otherwise deal with any policy”.
Two things follow. First, your insurance can end, because the policy is the lender’s security. Second, cancelling the policy doesn’t end the debt: the lender can still pursue the business, and any guarantor, for whatever is left, as it would with any other loan.
What happens if you miss a monthly premium payment?
When you pay the premium itself in monthly instalments, there’s no loan and no lender. The policy is an instalment contract with the insurer, and the Insurance Contracts Act sets out what happens when an instalment isn’t paid:
- An insurer can cancel a general insurance policy when the insured doesn’t comply with it, “including a provision with respect to payment of the premium” (section 60).
- It must give written notice first. The cancellation takes effect at 4 pm on the third business day after the notice, or later if the policy or notice says so (section 59).
- An instalment policy can set its own terms for cancelling over a missed instalment, but only once an instalment has been unpaid for at least one month, and only if the insurer explained this in writing before the policy started (section 62).
Through EquipCover, that’s how the monthly option works: if you can’t make a payment, the cover stops. There’s no loan, no funder and no loan balance to chase you for. There’s also no application and no credit check, because nobody is lending you anything.
What does paying by the month cost?
Our partner sets it up like this, over terms of up to 60 months:
| Feature | Pay upfront | Pay by the month |
|---|---|---|
| What you pay | One payment for the whole term | An initial payment, then equal monthly payments for the rest of the term |
| The initial payment | A share of the first year’s premium, the first monthly instalment and a one-off admin fee | |
| Extra cost | None | From 12.99% a year, higher on shorter terms, plus the one-off admin fee, which is worked out from the premium and capped |
| If a payment is missed | Nothing more is owed | The cover stops after notice; there’s no loan to repay |
Your indication shows each amount and the total you’ll pay. That’s the price of spreading the cost without a loan. Our partner says more than 80% of its clients choose it. The finance calculator shows both options for your own machine.
A missed payment still matters. From the cancellation, the machine is uninsured, and if it’s financed, your lender will expect cover to stay in place.
Premium funding vs paying monthly: side by side
| Feature | Premium funding | Paying the premium monthly (EquipCover) |
|---|---|---|
| What it is | A loan from a premium funder | Instalments of the premium itself |
| Who you owe | The lender, for the whole loan | The insurer, for each instalment as it falls due |
| Extra cost | Interest on the loan, plus fees such as an establishment fee | From 12.99% a year (higher on shorter terms) plus a one-off admin fee. No interest, because there’s no loan |
| Getting it | An application and a credit assessment | No application, no credit check: you choose it when you take the policy |
| If you can’t pay | After notice, the lender can cancel the policy and still sue for anything unpaid | The cover stops after notice. No loan debt follows |
| Guarantees | Some lenders ask for a directors’ guarantee on larger amounts | No loan to guarantee |
| Premium over time | Re-priced at every renewal, with a new loan each year | Fixed for up to five years |
| Length | 6 to 12 months, matched to an annual policy | 12 to 60 months, matched to your equipment finance |
Why does the difference matter for financed equipment?
Financed equipment already has one loan against it. Premium funding adds a second loan, for the insurance, and starts it again every year. Paying a fixed premium monthly spreads the cost the same way without a second loan.
There’s a third option with participating lenders: including the premium in the equipment finance, so one repayment covers the machine and its insurance for the full term. That does make the insurance part of that loan, so the loan’s terms apply to it.
What does premium funding cost?
Interest, at a rate the lender sets for your business, plus fees such as Westpac’s establishment fee. Both lenders say the interest may be tax deductible; check with your accountant. The figure to compare is the total amount payable over the loan against the premium paid outright.
Premiums themselves keep moving. Insurance prices paid by Australian households rose 47.9% in the five years to June 2026, about double the rise in all prices. With premium funding, each rise arrives at renewal and is spread across a new loan. Why premiums keep rising.
When is premium funding the better option?
- You hold several annual policies, such as liability, property and vehicles, across different insurers and want them in one monthly instalment.
- The equipment isn’t on the approved list for multi-year cover.
- You only need cover for a short period.
Want to pay monthly without taking on a loan?
Get your insurance indication in about 90 seconds.
Frequently asked questions
Is insurance premium funding a loan?
Yes. A funder pays your premium up front and you repay it in instalments with interest. Westpac says it “acts like a short-term loan”.
What happens if I can’t make my premium funding repayments?
After notice, the lender can cancel the policy and still pursue you, and any guarantor, for what’s owed. Westpac’s terms give at least 30 days’ notice of a missed payment first.
What happens if I miss a monthly payment with EquipCover?
The cover stops. Paying monthly isn’t a loan, so there’s no loan balance to repay.
How much more does paying by the month cost?
From 12.99% a year more than paying upfront, and higher on shorter terms, plus a one-off admin fee worked out from the premium and capped. Your indication shows the initial payment, each monthly payment and the total.
Can an insurer cancel my policy for a missed instalment?
Yes. Under the Insurance Contracts Act it must give written notice, or rely on the policy’s own terms once an instalment has been unpaid for at least a month, if it told you about those terms in writing beforehand.
When does premium funding make sense?
When you want several annual policies from different insurers in one monthly instalment, or the equipment isn’t on the approved list for multi-year cover.
Sources
- Westpac: Insurance Premium Finance (business banking)
- Westpac: Insurance Premium Funding general terms (version March 2025)
- Dynamoney: Insurance Premium Funding
- Insurance Contracts Act 1984 (Cth), sections 59, 60 and 62: cancelling general insurance, including instalment contracts
- Australian Bureau of Statistics: Consumer Price Index, insurance (quarterly series to June 2026; monthly release September 2026, published 28 October 2026)
- Product information and approved item list from our specialist insurance partner (August 2026)
General information only, not personal advice. Read the policy wording before you buy.
