What is Credit Insurance?
Credit Insurance is a type of insurance that protects the policyholder’s business by covering a range of losses. These losses could include rising unpaid debts that the business is suffering from, which is a credit risk that could lead to bankruptcy.
Since financial protection is extremely important for any business, Credit Insurance essentially protects the policyholder’s business from going bankrupt by covering losses incurred by non-paying customers.
In addition to this, Credit Insurance companies also provide credit management support to the policyholder’s business to help them make better financial decisions.
Benefits of Credit Insurance
There are many benefits of having your business insured by a Credit Insurance company. Firstly, your business is not only being protected from potential bankruptcy in the future, but the insurance company will also be taking special care to guide your business in terms of managing its expenses.
Secondly, the credit insurance company will help you cover the losses of a non-paying customer even if you decide to pursue legal action against the customer. The company will then recover the amount of money after the legal case has been settled.
However, the credit insurance company will only give you the sum of money if the legal dispute is not on the amount of debt owed. Despite this, if you have a Dispute coverage, the insurance company will give you the money.
Thirdly, if a business wants to grow and expand, there are a lot of risks associated with expansion. However, Credit Insurance protects your business from these risks.
In addition to this, people who are interested in either sponsoring or investing in the policyholder’s business will be encouraged when they find out that the business has been insured. Thus, making credit insurance an extremely favorable choice for business holders.
Types of Credit Insurance
There are many different types of Credit Insurance, some of them include
Critical Customer Coverage
Some customers are especially problematic in terms of paying their dues. Critical Customer Coverage is a type of insurance that is only for these customers.
This type of insurance essentially provides insurance cover for a certain number of customers (usually ten customers is the limit) who either have a poor record of not paying their dues or are threatened by bankruptcy. Also, these customers might also be important customers for the business, which is why the policyholder feels that they need to be insured by the business itself.
Export Credit Insurance
Export Credit Insurance is an extremely important type of insurance, especially for businesses who trade overseas. This is because it provides insurance against customers residing overseas who have not paid their dues.
In addition to this, Export Credit Insurance also provides coverage against extra risks that can potentially occur while trading overseas. These risks could include political instability, Social instability, Economic risks, and various trade sanctions imposed by the government.
Other issues that this type of insurance covers include currency issues (i.e., a shortage of foreign currency in the country that the policyholder’s business trades with) and various insolvencies.
Whole Turnover Coverage
This is perhaps the most simple type of Credit Insurance for your business since it is covered for the whole business. The business and the insurance company agree on a certain amount of acceptable credit that can be put forward by the business in advance. After the range of credit is settled, the premium is arranged according to the annual turnover of the business.
Specific risk Coverage
In this type of Insurance coverage, the coverage policies allow the business to have insurance against a specific customer. This means that the customer or a particular contract is of great value to the business. The premium, in this case, is decided according to the value of the contract or the profit the business earns through that customer throughout the policy.
Prominent Insurance Companies that offer Credit Insurance
Many Insurance Companies offer Credit Insurance. However, there are a few very prominent companies that offer the best, most comprehensive insurance plans. Some of these companies include
This Insurance Company has been working to provide all kinds of Insurance for around 35 years.
AIG operates in around 160 countries across the globe and provides excellent credit management and debt collection services to its customers. Their Credit Insurance, especially Export Credit Insurance, is one of the best in the world.
Euler Hermes also operates in around 50 countries all over the world. They provide excellent Trade Credit Insurance since they have around 100 years of experience about the provision of Insurance, which makes them another great choice for business holders!
Thus, Credit Insurance is a wise and safe choice for every business since it not only protects your business but also helps it flourish.