In simple terms, credit insurance is insurance that is taken out to protect you against bad debts. In more detail, having a policy for this type of insurance will provide your business with vital protection against non-payment for either goods or services. This may be due to the failure of a customer to pay their bills.
For a vast majority of companies, over 40% of current assets are made up of money owed for goods and services provided on credit terms. Many of these companies insure all their other assets from buildings and stock to key personnel. However, if your largest asset is uninsured, then disastrous consequences could be on the way.
What exactly can credit insurance do for your business?
Firstly, it will help to minimise bad debts and allow your company to expand its sales safely, in the knowledge that you will definitely be paid. By identifying which of your current, as well as potential customers are credit risks you can concentrate your sale efforts on those who offer the better prospects for growth.
What types of cover are available?
Whole Turnover is a type of cover that is based on all insurable sales, but excludes any business transacted directly with local authorities, government departments, members of the public and cash & credit card sales. Normally there is an excess that excludes losses below an agreed figure, which typically falls between £500 and £1000. However, this can be set higher if a lower premium rate is required.
A Catastrophe policy on the other hand is slightly different from Whole Turnover, as the premium is usually fixed for the year and has limited bearing on turnover as opposed to the case for a Whole Turnover policy.
Lastly, there is a limited market into which we can place one-off larger contracts or one or more of a company’s largest customers. Underwriters tend to be much more stringent in their requirements due to the selective nature of this risk. However, several companies will consider this type of cover, so simply enquire.