Doing business in a business environment means taking on certain risks such as late payment, corporate bankruptcies, unpaid invoices, and more. Such risks jeopardize the viability of your business. To avoid the bankruptcy of your business you need to avoid or reduce these risks. Credit Risk is the risk that exists in a business or an organization that they do not receive their receivables on time or even, in some cases, never receive them. The Credit Insurance undertakes to cover this risk faced by businesses.
Credit Insurance protects your business requirements and provides the opportunity for any size business to trade safely, both in the domestic market and abroad.
This type of insurance refers to various types related to financial credits such as:
- Commercial credit protection, purchased by companies to secure payment of credit extended by the business
- Payment protection insurance, purchased by consumers to secure payment of credit extending to the consumer
- A credit derivative, financial instrument or technique designed to separate and then transfer the credit risk of an underlying loan
An insurance policy such as Credit Insurance is a risk management product offered by private insurance companies and government export credit organizations to business entities that want to protect their accounts receivable from credit risk losses such as deferred default or default. This insurance product is a type of property insurance, and should not be confused with products such as life insurance or credit disability, which individuals acquire to protect themselves from the risk of losing the income required to pay off debts.
Credit Insurance is an insurance product that allows entrepreneurs to secure the repayment of credit if the debtor dies, falls ill or becomes disabled, loses a job or faces other circumstances that may prevent him from earning income to service the debt. Not to be confused with income protection insurance, which does not specifically cover a debt but covers any income.
With this protection, payments are covered for a specific period, usually, 12 months, at which time they may be marketed as short-term income insurance.
There are some basic categories such as:
Categorization in relation to the buyer:
- Domestic Credits
- Foreign Credits
Categorization in relation to the duration of the Credit:
- Short term (up to 12 months)
- Medium-term (12 months to 5 years)
- Long-term (over 5 years)
What is not covered with Credit Insurance:
- Sale to the public (administrative courts)
- Sales in long-term settlement (leasing)
- Controversial claim
- Sales to individuals
- Sales to connected or affiliates companies
- Transactions with governments – states (supervised bodies, institutions, etc.)
- Sales to debtors who do not have commercial nature
- Natural causes: earthquake, atomic explosion, volcanic eruption
- War, civil war, revolution, terrorist acts
- Prior to insurance in proven solvency or late payment status and be known to the insured
- As in all insurances, there is a requirement for the insured to act as if he were uninsured
Advantages of Credit Insurance:
- Expands the company’s financing options by increasing its lending base
- Enhances the effectiveness of the company’s credit control department by continuously monitoring the solvency of buyers
- It allows exporters to grow safely by offering open payment terms
- Helps companies grow sales confidently, without credit risk in new markets
- Guaranteed protection against non-payment
- Effective Compensation
- Claiming trade claims on a global basis
In addition, your insurance company monitors and monitors the financial situation of your clients, so that you can know at any time if they are able to pay you. It also informs and advises you on the credits you will give to your buyers since it has specialized knowledge of the industry.
To whom is Credit Insurance is mainly addressed to:
This cover is addressed mainly to companies that are active in trade, shipping, industry, fuel, primary sector, food sector, and generally in sectors that enable their customers to repay with credit.
Moreover, is a multi-tool that combines financial and insurance coverage, designed to protect the business requirements of your business, regardless of size.
At Delta Insurance Consultants, we can provide your business with the right Credit Insurance plan, according to your needs and financial capabilities, in cooperation with the largest insurance companies in the Credit Insurance sector, which have many years of experience in the field.
For more information contact us