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How does it work?
Unlike other types of business insurance, once a
company purchases business credit insurance, the policy does not get filed
away until next year’s renewal, but rather the relationship becomes
dynamic. A business credit insurance policy can change often over the
course of the policy period, and the credit manager plays an active role
in that process.
The better-established credit insurers are “limits underwriters,”
meaning that the policyholder’s more significant buyers will be analyzed
individually and each assigned a credit limit for coverage. This is
where the type and amount of information the insurer collects on a buyer
plays a very important role in monitoring, because credit limits are
assigned based on the information available about that particular buyer.
Throughout the life of the policy, the policyholder may request
additional coverage on a specific buyer should that need arise. The
insurer will investigate the risk of increasing the coverage and will
either approve the additional coverage, or decline with a written
explanation. Similarly, policyholders may request coverage on a new
buyer with which they’d like to do business.
The credit insurance company will proactively monitor its
customers’ buyers throughout the year to ensure their continued
credit-worthiness. They do this by gathering information about buyers
from a variety of sources, including: visits to the buyer, public
records, information supplied by other policyholders that sell to the
same buyer, receipt of financial statements, etc.
When signs indicate a company is experiencing financial difficulty, the
insurer notifies all policyholders that sell to that buyer of the
increased risk and establishes an action plan to mitigate and avoid
loss. The ultimate goal of a business credit insurance policy is not to
simply pay claims as they arise, but rather to help policyholders avoid
foreseeable losses. If an unforeseeable loss should occur, the
indemnification aspect of the business credit insurance policy comes into
play.
In these cases, policyholders would file a claim with supporting
documentation, and the insurer would pay the policyholder the claim
benefit typically within 60 days from the date of loss.
Since each policy is different, the best way to see "how
it works" is to call us.
Let's talk about how business credit insurance might work
for you..
Contact us now for more information -
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