What best describes 'premium financing'?

Premium financing refers to a financial arrangement in which a third party, often a lender or a financial institution, pays the insurance premium on behalf of the insured. This arrangement allows the insured to receive coverage without having to pay the entire premium upfront. Instead, the insured typically repays the financing entity over time, which may also involve interest or fees. This method can be particularly useful for individuals or businesses who want immediate coverage but may not have the necessary funds available at the time the premium is due.

In this context, the other choices do not accurately describe premium financing. A policy that lowers premiums refers to a different concept entirely, while the amount paid by the insured directly relates to premium payments rather than the financing arrangement. A discount for early payment incentivizes prompt payment but does not involve third-party financing. Therefore, choice B effectively captures the essence of premium financing within the realm of insurance practices.