Credit Insurance

Get paid even if your customer doesn’t pay you

Credit insurance helps protect your business against customer defaults, giving you the confidence you need to grow safely. It will replace crucial lost cash flow at the time you need it most.

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What is Credit Insurance

Credit insurance, also known as credit risk insurance or trade credit insurance, is a type of insurance coverage that protects businesses against the risk of non-payment by their customers. It provides financial protection in case customers fail to pay their trade credit debts due to insolvency, default or other specified reasons. Credit insurance is particularly relevant for businesses that offer credit terms to their customers, allowing them to defer payment for goods or services.

How does Credit Insurance work

  1. Coverage scope: a business purchases credit insurance to cover its accounts receivable (unpaid invoices) from customers. The insurance policy specifies the types of risks and events that are covered.
  2. Risk assessment: the credit insurance provider assesses the creditworthiness of the business's customers to determine the level of risk associated with extending credit to them.
  3. Policy issuance: based on the risk assessment, the insurance provider issues a policy to the business. This policy outlines the terms, conditions, coverage limits, and premium costs.
  4. Premium payment: the business pays regular premiums to the insurance company, similar to other types of insurance coverage.
  5. Monitoring and reporting: the business regularly reports its sales and outstanding accounts receivable to the insurance provider, keeping them informed about the credit transactions.
  6. Claim submission: if a covered customer fails to pay its debt due to insolvency or default, the business can submit a claim to the insurance company.
  7. Claims processing: the insurance company evaluates the claim, verifies the circumstances of non-payment, and if approved, pays out a percentage of the unpaid amount to the business. The percentage covered is determined by the terms of the policy.
  8. Loss recovery: in some cases, the insurance company might also assist the business in recovering the outstanding debt from the customer or debtor, depending on the policy terms.

The benefits of Credit Insurance

  • Risk mitigation: credit insurance helps businesses mitigate the financial impact of customer defaults, insolvencies, or economic downturns.
  • Enhanced financing: Lenders may be more willing to extend credit or provide financing to businesses with credit insurance coverage, as it reduces the credit risk.
  • Strengthened cash flow: in case of non-payment, credit insurance ensures that the business still receives a portion of the outstanding amount, maintaining cash flow stability.
  • Expansion opportunities: credit insurance allows businesses to confidently explore new markets and customers, even internationally, knowing that they're protected against potential payment issues.
  • Better decision making: with access to the insurance provider's credit data and risk assessment, businesses can make more informed credit decisions when dealing with new customers.

It's important for businesses to carefully review policy terms, coverage limits, and exclusions before purchasing credit insurance. Different insurance providers offer various types of coverage, so understanding the specific risks that your business faces is essential to choosing the right policy.

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