Overview of payment plans

Down payments and out-of-sequence first installments

A payment plan can convert a pro rata charge into invoice items using one of three approaches:

  • A down payment and a set of periodic installments
  • A set of installments where the first installment is out of sequence from the remaining periodic installments
  • A set of periodic installments only

A down payment is an invoice item whose amount is typically specified as a percent of the charge. Down payment amounts are typically different than periodic installment amounts. Down payment invoice items can have placement dates that are out of the regular sequence of the periodic installments.

Typically, the bulk of a charge is divided into a set of periodic installments. A periodic installment is an invoice item whose placement date follows a regular cadence (such as installments with placement dates of February 1, March 1, April 1, and so on.) The amount of each periodic installment is the same, except for the possibility of a few pennies that do not distribute evenly.

An out-of-sequence first installment is an invoice item whose amount is the same as other periodic installments. But, similar to a down payment, the placement date is out of the regular sequence of the periodic installments.

A payment plan can specify:

  • A down payment (and no out-of-sequence first installment)
  • An out-of-sequence first installment (and no down payment)
  • Neither a down payment nor an out-of-sequence first installment (only periodic installments)

However, a payment plan cannot specify both a down payment and an out-of-sequence first installment.

Equity warnings

Equity is a measure of the amount of service that has been paid for minus the amount of service that has been provided. Typically, insurers want a policy's equity to be positive, as this means the insurer has not provided service that has not yet been paid for.

When a user attempts to make changes to a policy's invoices that would violate the preferred amount of equity, BillingCenter displays an equity warning message.

Equity warnings are enabled through a global application configuration parameter. Once enabled, their behavior is controlled by several equity warning settings in the policy's payment plan.

  • If equity warnings are disabled for BillingCenter, you cannot specify equity warning settings in any payment plan.
  • If equity warnings are enabled for BillingCenter, but a given plan is used for premium reporting, you cannot specify equity warning settings for that payment plan.
  • If equity warnings are enabled for BillingCenter, and a given plan is not used for premium reporting, you must specify the equity warning settings for that payment plan.

Payment plan overrides

An insurer may want a payment plan to behave one way for most billing instructions, but a different way for a specific type of billing instruction, such as a renewal billing instruction. BillingCenter supports this with payment plan overrides. A payment plan override is a set of one or more values on a payment plan that overrides the normal values when the charges are on a specific type of billing instruction.

You can create, modify, and delete payment plan overrides through Cloud API. For more information, see Payment plan overrides.