How Credit Insurance Protects Companies Against Contract Defaults

Credit risk insures against the possibility that one of two contracted parties will not be able to meet with a contract’s financial obligations. The amount of risk provided for in insurance arrangements depends on the parties’ financial stability.

Types of Insurance

Trade debtors are a company’s largest assets. If a debtor becomes insolvent and fails to pay, credit risk insurance will make sure a company’s cash flow will not be a casualty. Types of policies can include:

  • Key accounts
  • Whole turnover
  • Single risk
  • Export, political or domestic risks

Why Use It?

Credit risk insurance lends structure and control to credit management. Benefits include:

  • Working capital
  • Growth
  • Exporting
  • Risk assessment
  • Cash on delivery
  • Risk monitoring

Aspects Involved

Not only can companies that provide credit risk insurance protect businesses from financial losses due to insolvency or non-payment but also cover losses incurred through world political events and cover disputed debts.

Insurance payouts are typically around 90 percent and cover all sectors of trade. Coverage extends to a single customer, all of them or a defined group.

Options include:

  • Transfer risk – A trade-debtors risk transfers to an insurer.
  • Lost revenue – If the insured party holds an underwritten insured limit, payouts are typically 90 percent of the revenue loss.
  • Multi-use or single – This option covers one, several or all customers.
  • Trade type – Credit insurance is available for all sectors of business.

Dedicated Specialists

Credit insurance has been a proven coverage option for more than 100 years. Knowledgeable and experienced credit professionals make it their mission to arrive at a policy that ensures companies will be covered against insolvency and protracted default. Contact Trade Risk Group to discover more.

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