Also known as: premiums · insurance payment
Written by attorneys · grounded in primary & secondary sources — see below
An extra charge imposed by a lender on a borrower who repays the principal of a loan before its scheduled maturity date. The charge compensates the lender for lost interest and is enforceable when the note or applicable state law permits it.
Pavel Petrov borrowed from Prime Logistics to purchase commercial property and later sold the property at a profit. He tendered the full remaining balance six months early. Prime Logistics accepted the payment but assessed an additional sum equal to three months of interest as a prepayment premium. The mortgage was discharged only after Pavel paid the premium and the lender recorded the satisfaction.
A gasoline dealer transferred occupancy rights to a new lessee under a state rent-cap statute. The outgoing lessee demanded an upfront payment reflecting the capitalized value of the reduced rent. The incoming lessee paid the premium to secure the lease but later challenged the arrangement as failing to deliver the intended consumer savings.
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A consumer faced a billing dispute with a wireless carrier whose arbitration clause offered a $7,500 premium payment if the consumer prevailed after informal resolution failed. The consumer elected arbitration to obtain the premium rather than joining a class action barred by the agreement.
Shareholders of Basic Inc. sold stock while merger talks were underway. The eventual acquirer paid a substantial premium over market price. Plaintiffs alleged the undisclosed discussions rendered the premium material information that should have been disclosed before the sales.
A state constitutional amendment prevented local governments from requiring insurers to ignore distinctive health risks associated with homosexuality when setting rates. Insurers could still charge higher premiums based on anticipated risk but could not be forced to disregard the classification.
An insurer domiciled in State A issued a life policy to a resident of State B and collected the annual premium by mail. After the insured died, the beneficiary sued in State B. The court held that the premium collection plus the policy's delivery created sufficient contacts for personal jurisdiction.
A prepayment premium is enforceable when the note or applicable state law expressly permits it. Payment of the full debt plus the premium entitles the mortgagor to a recorded satisfaction that clears title.
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No. The statute may allow the outgoing lessee to capture the capitalized value of the rent reduction as a premium paid by the incoming lessee, leaving the new tenant with the same net costs as before the cap.
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A substantial premium payable only in individual arbitration can induce the consumer to forgo class proceedings and pursue the individual claim to obtain the bonus payment.
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…C. 1322a [(1976 ed., Supp. V)] (Schedules proposed by Pension Benefit Guaranty Corporation (PBGC) which requires an increase in premiums must be approved by concurrent resolution;) (revised premium schedules for voluntary supplemental coverage proposed by PBGC may be disapproved by concurrent resolution). "37. Farm Credit…