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Credit insurance protects businesses who trade with other businesses on credit terms. It sits hand in hand with risk management of the ledger.
Cover is for The insolvency (including CVA’s and administration) of your customer, and protracted default – simple failure to pay. For exporting businesses, a range of political causes of loss (civil war, loss of import licence, transfer delay) can be included. Typically not covered are, cash sales, sales to UK Government bodies, VAT and disputes with your customer.
Claims are typically paid within 30 days of the date of loss, which in most cases is the date of insolvency. There can be delays, notably where the underlying sales contract is more complex, but interim payments can usually be negotiated.
This is negotiable, but you will almost always bear a portion of the loss, typically 10%.
No, but the more selective you are about what you insure, the more expensive it can become, and the more you run the risk of incurring an uninsured bad debt on a customer you excluded.
Prices vary hugely depending on the size of your business, what you do, and what you are covering. For smaller businesses premiums (for the whole ledger) start at around £3,000 + IPT (though single invoice cover is considerably cheaper). Larger businesses should expect premium in the tens of thousands.
For exporters, there are some options using secure payment methods such as letters of credit. Banks and asset based lenders often provide debt protection as part of an invoice discounting or factoring facility (see Finance for Business) though this can be relatively expensive and does not always suit. There is cash in advance, though you risk losing the sale, or you can check out your customer using a status agency, take the risk yourself, and hope for the best.
As brokers we act in your interests and act as your expert in front of the insurer. We use our expertise and knowledge to help protect your business and we try to ensure that, when the worse does happen, the insurer pays out. As our earnings are usually by way of a commission paid by the insurer, our services come at no additional cost to you.