Credit Insurance and Accounts Receivable Insurance

Accounts Receivable Insurance For The Financial Protection of Your Business

by Trade Credit Insurance

Credits or accounts receivables are often the most crucial asset of a business— especially in today’s economy. You just can’t afford to have your customers not pay the amounts they owe from your company!

For this matter, business owners can’t help but question if Accounts Receivable Insurance eventually pays off?

Let’s find out more about it and determine whether the investment is worth it for your business or not.

What is Accounts Receivable Insurance?

Accounts Receivable Insurance protects businesses from unpaid accounts if, for example, a client fails to make their monthly payments on time due to the client going bankrupt, getting liquidated, or going out of business.

It’s practically useful, particularly if the client isn’t able to pay the bills for six or more months in a row.

This type of insurance does more than protect your business against bad debts; it also improves your accounts receivable value. Knowing that your accounts receivable are insured, your lenders can be encouraged to offer you increased credit limits and better terms.

Accounts Receivable Insurance offers you many other benefits, such as:

  • To reduce business debts significantly.
  • To free up capital for other investments.
  • To extend your market to buyers or develop markets that are otherwise deemed too risky.
  • Get ahead of the competition by offering customers more flexible payment terms.
  • Accounts Receivable is tax-deductible insurance.

Tips For Choosing the Right Accounts Receivable Insurance

Several companies offer this type of insurance, but they all differ in terms of the benefits they provide and what they charge for their services.

Before committing to any company, it is essential to compare all aspects of your accounts receivables insurance policy and find out what kind of plan works best for your business goals. A quality company will have a solid reputation, is backed by an experienced team, has a good track record, and can provide you with all of the benefits you need.

While looking for the right company to handle your accounts receivable insurance, be sure to read the fine print. You should read the entire fine print to know what type of coverage the company offers and what kinds of accounts it covers. If the company has a wide range of policies, you may want to select the most suitable plan for your specific needs.

Another aspect to consider is credit payment protection. This is especially important if you have a high percentage of debt in your bank and other accounts. Ensure that your company can provide you with this service so that if you do not pay your bills on time, you will not lose all of the money you have accumulated over the years and be left with nothing.

Lastly, when comparing insurance coverage policies, it’s also vital to note the company’s customer service. Some accounts receivables insurance policies only cover the period when you actually receive your payments. This means that if you do not make your payment on time, you will still have an outstanding balance to deal with. When a company provides customer service, they will have someone who will call or email you and professionally deal with your account and payments.

Of course, getting your payments in on time plays a significant part in getting your business. Companies who offer accounts receivables insurance can only benefit you by providing you with a way to ensure that you always have money to pay your bills each month.

Is Accounts Receivable Insurance Worth It?

If you are in the business of collecting payments from customers or clients, you have probably had to deal with claims in the past. This is why you need to understand whether this type of insurance is worth the money you are spending.

Accounts receivable insurance covers payment collection costs from individuals and businesses who have overpaid you for goods or services. This type of insurance is available to just about anyone, no matter what their business is. It is even available to small business owners who are just starting, as they are not required to carry this kind of insurance independently.

So, what makes accounts receivable/credit insurance an advantage?

As it covers your business in case someone misses a payment and allows you to get paid from the accounts you have already collected, it, therefore, prevents you from having to make another collection. It also protects you if you have to manage a large amount of money in a short time. In many cases, accounts receivables insurance can cover the collection expenses, meaning that you will not have to pay a dime if you do not get the money you need.

The good thing about it is that you do not have to worry about paying upfront. This means that you can easily set up a monthly service contract and collect your payments as soon as you receive a claim.

Here’s what can you basically expect from Accounts Receivable Insurance: 

  • First, when you have a collection, you must notify your insurance company right away so that they can process your claim. 
  • Second, you must send a written notification of the collections, along with any supporting documents to your credit card company within the given period.
  • Third, when they receive your collection, they will investigate the information and determine if you are legally obligated to pay the debts you owe them and if they can prove that you are legally obligated to pay those debts.

Finally, after determining whether or not you are legally obligated to pay the debt, the insurance company must send a certified check to you in the amount of the debt within fourteen days. By doing all of these steps, you should be well on your way to being fully paid for your accounts receivables.

In A Nutshell

The benefits of credit insurance are diverse, such as:

  • Risk reduction: Covers up a high percentage of losses incurred as a result of bankruptcy or non-payment of a customer.
  • Better bank financing: Give your credit insurance as collateral to your bank and get better terms.
  • Better credit management: Use the insurer’s expertise on your clients’ creditworthiness to guide your credit management.
  • Sales support: Safely increase your sales and grant better payment terms.

So, is accounts receivables insurance worth it? Measure up long-term goals in growing your business, and you’ll find out that the answer is plain “yes.”

Discover how we can help you make better financial decisions for your business. Contact one of our Accounts Receivable/Credit Insurance specialists today!