Compensation Glossary

Pre-Authorized Payment System

A payment method that allows a policyowner to sign an authorization to pay insurance premiums. The authorization is two parts. The first part gives the insurer authorization to withdraw the premium from the insured's account. The second part gives the bank authorization to allow withdrawals that do not have the insured's signature. If this authorization system is completed via checks, it is then called the pre-authorized check (PAC) system.