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Accounts receivable, typically represent more than 40% of a company's
assets.
It is probably your most valuable and volatile asset.
All of your time, money, labor, materials... everything you have
invested... plus your profit is represented by your accounts receivable.
This valuable asset is no longer in your hands.
How can you protect
it from what might happen to your customers' businesses.
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What is Business
Credit Insurance?
Business credit insurance (also known as credit insurance or trade
credit insurance) is a specialized type of property and casualty
insurance that offers companies protection against the financial
consequences of customer bankruptcies, insolvencies or even slow-paying
accounts.
In
other words, Business Credit Insurance guarantees against excessive
losses due to your customers' inability to pay for goods and/or services
you have provided on open credit terms.
Export business credit insurance also provides political risk coverage.
There are several ways to structure a credit insurance policy. A good
business credit insurance broker can help you with that. A good broker
knows how to structure the policy to best meet your needs and he/she
knows which insurance provider to place it with.
In most
business credit insurance policies, the larger credit customers are
covered by name in the policy for an amount of coverage that is agreed
on by the insurance company and the policy holder. Because of this, the
insurance company monitors the accounts covered in all active policies.
If the account's financial position deteriorates, the insurance company
reserves the right to cancel coverage as to future shipments. In this
manner, the insurance company becomes your partner in avoiding credit
losses and they have access to proprietary information on millions of
companies.
The
premium is based on several factors and can vary widely from one company
to another because no two risks will be the same. Typically, the cost of
a business credit insurance policy is a small fraction of 1 percent
of covered sales. When an insured sustains a covered loss, the
insurance company reimburses the loss up to 100 percent above a
pre-established deductible and/or coinsurance. The deductible reflects
the expected loss ratio of a company of a certain type and size. The
coinsurance encourages a partnership between the insured and the
insurer.
Example:
You ship $100,000 order out on open credit and it might cost you a few
hundred dollars to insure payment (maybe a couple hundred). That's not
much to pay for the peace of mind that comes with knowing that you will
be paid. Plus, a properly structured business credit insurance can
enable improved profits to more than offset the premium.
Accounts
receivable can be a company's most valuable, yet most vulnerable asset.
Just as inventory and equipment are routinely insured, it makes good
business sense to have coverage for this valuable resource. Your
accounts receivable represent your inventory after it has left the
building with your profit.
Contact us now for more information -
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We can show you how business
credit insurance can help to improve and protect your cash-flow.
Or maybe you would like to safely increase your sales. Credit can be a
very successful sales tool.
Also, you will have access to excellent third party credit guidance.
Your business credit insurance provider will monitor your larger
exposures.
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