April 18, 2024
credit insurance

In an uncertain economic environment, commercial debt is probably one of the biggest risks for a company, since it can assume up to 40% of its assets. What happens when one of your buyers fails you?

In the event of insolvency or non-payment, the stability of your company may be affected by serious financial problems by the impact of this incident. Indeed, the turnover to be made to compensate for the loss due to an invoice which has not been honored by a debtor can be very high when the margins are low. Credit insurance protects the assets of an activity against the default of payment of its credit sales and the bankruptcy of one of its customers . It warns and protects policyholders from possible unpaid debts. Obtain a financial guarantee for your sales with payment terms of up to 120 days and be assured in the event of non-payment.

What is credit insurance?

Credit insurance is a product that allows the insured to protect themselves against the risk of default on accounts awaiting collection and arising from commercial transactions on credit.

It is a mechanism intended to cover and control the default or insolvency of the debtor when a transaction has been carried out with postponement of said settlement. If your customer does not pay his invoice, this backup protects your claim. It generally applies to buyer’s bankruptcy and political risk, although it can extend to many other causes of non-payment as agreed in the terms of the policy. In many cases, credit insurers can cover up to 95% of the debt.

This coverage or protection translates into three aspects or services:

Prevention : good business risk management is the cornerstone of allowing your business to grow safely. Develop your structure with the certainty that you are establishing the right business relationships, thanks to the best information on your current and potential buyers. The prevention and monitoring of your buyers is carried out upstream by the analysis and continuous monitoring of the financial situation of your customers.. Thanks to the analysis of threats of payment default provided by the insurer, the insured can determine whether he can extend credit to his business customers. So you can take care of the management of your activity and not the commercial fears. The insurer continuously and proactively monitors your risks, guiding you to ensure your business enjoys guaranteed growth and alerting you whenever there is a change in the dangers. You access information on variations in the quality of your leads through administration tools available online. When and where you want.

Collection of your invoices : whereby the insurer sets up mechanisms to ensure that the unpaid account is settled by the debtor. They take care of all the steps necessary for the collection of receivables as well as the management of disputes, with a local service throughout the world.

Compensation for your unpaid invoices: In the event of failure of the bill collection service, the company compensates you for the losses as established in the coverage of your policy . The indemnity is valid when the default of the debtor becomes final due to the presumed or declared insolvency of the latter or any other reason making it impossible to collect the account pending collection. The compensation periods vary between 1 and 6 months depending on the context of the files.
To sum up, on the question what is credit insurance? : this insurance security protects companies against non-payment of commercial debts. It ensures that the bills will be paid and allows companies to reliably manage political or commercial risks that are beyond their control.

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