Invoice Insurance Premiums

The purpose of this process is to handle the insurance premium billings for clients. Generally, the insurance premiums are paid by your customers. It is also generally true your clients include insurance premiums with their Association dues. Sometimes, however, the insurance premiums are included in homeowner's mortgage payment; usually to a bank or other financial institution. The additional billing and accounting for these insurance premiums is an additional fee above and beyond the usual Client contract price, and the subject of this documentation piece.

The reason for this additional fee is simple: most Associations include the insurance premiums in with the monthly dues. As a result there is no need to process any additional billings or provide additional accounting. This service, therefore, is a service dependent upon your individual needs. You have the choice of utilizing our services here, or not.

This billing and accounting service generally breaks down into four areas:

1. Determination of who the mortgagee is on each unit,
2. Preparing and mailing a bill for each unit's share of the premium,
3. Accounting for the balance due separate from each customer's account, and
4. Receiving and accounting for each payment received.

The general difficulty of this service stems from the fact you have to rely on sources of information you have no control over; customers, banks, VA, FNMA, etc. This problem is compounded when these sources either ignore your requests for information or deliberately withhold information pertaining to your customers. The following is a brief description of what is provided by your office and the costs involved:

Determination of Mortgagee(s)

1. Request from each customer their correct mortgagee each month.
2. Request from each closing company the new mortgagee for any unit sales.
3. Request from each closing company the new mortgagee of any refinancing.
4. Review of last year's insurance files to determine what mortgagees paid for which units.
5. Review of individual customer files for any indication of recent changes.

This information is maintained in your computer database and manual files and you have no choice but to rely on it. Difficulties arise when you realize a customer might receive their monthly statement requesting mortgagee updates and never inform you of any changes. This is also true with closing companies. You request mortgagee updates upon each sale. You are sometimes lucky to receive the correct payoff figures let alone something so unimportant as mortgagee information.

Preparation of Billings

1. Calculate each owner's share of the insurance premium.
2. Make copies of Insurance Premium billing and A/P check paying premium.
3. Prepare letter to mortgagee requesting reimbursement.
4. Mail letter "Certified Return Receipt Requested".

You would like to simply send the billings without going to the trouble of certified mail. However, it has been our experience about 25 percent of the financial institutions simply do not respond to your billings. There are two reasons for this non-response: the financial institution has lost the billings or they no longer hold the mortgage. The most frequent cause is the original billing(s) were lost. Since the financial institution will usually blame your firm for not sending the billings in the first place, sending them by "Certified Return Receipt Requested" will to prove otherwise.

Account for Premium Separately

1. Prepare log for all insurance billings including customer# and amount due.
2. Monitor payments comming in against this log to ensure complete payment.
3. Keep this log available for any request for customer balances (i.e. closing information requested upon sale, etc).
4. Update customer account with new information received.

This method of accounting has various pros & cons. Homeowners are not billed for the insurance premium unless no other responsible party can be identified. This method prevents aggrevating homeowners. On the other hand, separate accounting as described above creates an environment allowing for errors in tracking amounts due on customers. Your ability to track information by computer allows you to minimize the risk of loss to your Client from unpaid insurance premiums.

Receipt for and Deposit Payments

1. Receipt for premium payments and track which premiums are still due.
2. Provide record of all premiums have been and have not been paid.
3. Deposit premium payments into your bank account in timely manner.

This is perhaps the easiest part of the whole process. It is usual for about 75 percent of the premiums to be received within 45 days of billing. This means your reserves are only losing interest for a very short period of time. The sooner the billings can be processed the less time it takes to collect the premiums.

For this entire process, an Association can expect to pay about $12.50 - $15.00 per customer. If payment is not received in an appropriate amount of time, you can duplicate this entire process a second time for $25.00 per billing. Any collection effort expended after the second billing could be charged at an hourly rate. The amount paid would depend on the amount of service necessary to collect the premium.

The most important aspect of this process is you must rely on outside sources for our information. If these sources are unable or unwilling to provide the needed information to properly accomplish the billings then you end up paying more. This is an unfortunate reality when dealing with businesses in a real estate market turned upside down.