Credit Insurance and Accounts Receivable Insurance

What is Credit Insurance

by Heather Smart Johnson

What Is Credit Insurance?

Not to be confused with the consumer insurance product that covers debt payments in case of unforeseen circumstances such as illness, disability, job loss, or death, business credit insurance covers loans that companies give to other businesses in the form of trade credit, or the ability to pay for goods or services after they have been received.

What’s In A Name?

Credit insurance is known by multiple names that can be used interchangeably: credit default insurance, nonpayment insurance, and credit risk insurance all mean the same thing. Credit insurance is a type of property and casualty insurance.

The Importance of Risk Management Tools in Credit Insurance

Credit insurance covers a substantial portion of the risk that companies take by offering trade credit, whether the business they provided goods or services to defaults or payment is delayed. Credit insurance may also cover the political risk of export receivables, meaning your company may be covered if there is political unrest, if a currency is not able to be converted in a foreign country, or even due to acts of terrorism.

Free Tools Offered by 

Borrowing Calculator – Estimate Borrowing Capacity

Business Credit Report – Check Out a Credit Reporting Agency

Find A Business Collection Agency

Find Business Bankruptcy & Preference Claim Attorneys

Find a Receivable Put Provider

How Credit Insurance Provides Peace of Mind

With credit insurance, your company can increase sales by raising credit limits to existing business partners and even offering credit to new clients. Credit insurance can also help your company get accounts receivable financing as a lender can be named as the policy beneficiary. 

>>Our industry experts talk more about the value of peace of mind by mitigating business risk<<

Other Benefits Of Business Credit Insurance

  • Credit insurance may help to provide a path to resolve payment disputes.
  • Companies may receive a payout from their credit insurance policy not only for insolvency but also for slow pay and political risk.
  • Your company may not be limited to insuring only strong debtors. You may be able to insure some or all of your debtors.

How Does Credit Insurance Work?

Companies are charged a premium for credit insurance. Premiums are generally charged on insured sales volume, but sales-based pricing is not the only option. Other options include coverage, A/R, and flat-rate methods

The credit insurance policy usually covers a portfolio of trade credit or open accounts and pays an agreed-upon percentage of the unpaid insured accounts receivable balance not to exceed the insured limit of coverage. The premium rate is based on the average credit risk of the insured portfolio of open accounts. Occasionally, a company will take out a credit insurance policy for a single transaction by a single buyer, for instance, a large purchase by a new client.

Many businesses need credit to be able to purchase goods and services. Granting credit can give your company a competitive edge. Credit insurance can help mitigate the risk and help secure sustainable growth.

 We offer unbiased credit insurance specialists that find you the best credit insurance provider.

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