Frequently Asked Questions about Credit Insurance

Frequently Asked Questions about Credit Insurance

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What is credit insurance / accounts receivable insurance?
Credit or accounts receivable insurance is a special insurance product designed to protect your company's trade credit exposure from bad debt loss caused by insolvency, default or political risk.

Why should I use credit or A/R insurance?
The key benefit of credit insurance is to protect your accounts receivable against bad debt loss. Securing your accounts receivable has the added benefit of enhancing your bank relationship, possibly maximizing borrowing capacity and increasing sales by offering open credit terms and shedding costly-and time consuming-letters of credit (L/Cs).

Credit insurance programs also enhance your credit management by supporting your decision making process through offering third-party evaluations of customers, prospects, industries and countries.

What are the advantages of Trade Risk Group?
Credit insurance is complex. You need a knowledgeable, service-oriented team to help you find the right insurance carrier and policy structure for your business. Trade Risk Group is a premier specialist credit insurance broker with experience in all industry sectors. We will save you valuable time and money by working with the credit insurance carriers for the best price for the coverage you need. Once in place, we service your policy and handle underwriting, claim and policy management issues.

Best of all - Trade Risk Group offers these valuable services at no additional cost to your policy premium. Your premium remains the same whether you go through a specialist credit insurance broker or direct through the insurance carrier. By putting our expertise to work for you, we can help you get more out of your policy without taxing your resources.

What does it cost?
Your credit insurance premium will depend on the policy structure and risk issues. Domestic programs are typically between 0.1% and 0.5% of sales based type of business, your customer base and loss experience. Export insurance can range between 0.5% and 1.0% of covered sales.

What could my policy cover?
Basic credit insurance policies protect against bad debts occurring from your customers' bankruptcy, liquidation, receivership, and other types of insolvencies. You may also wish to cover undisputed slow pay losses. For foreign trade, political risk coverage is available to protect against loss due to currency inconvertibility, contract frustration, acts of war and other events that prevent the delivery of goods or contract fulfillment.

Do all accounts need to be covered?
No. You can choose to protect against a large loss, covering only your largest credit accounts. In some cases, single buyer policies may also be available.

What could credit insurance give me?
In addition to minimizing payment risk, credit insurance can be valuable financial services tool. With your credit insurance programs, you get:

Credit protection - By protecting your accounts receivable with credit insurance, you can effectively reduce your bad debt reserve while minimizing the impact of the insolvency or default of one of your key accounts.

Sales funding - Through extending credit to new and current customers, you will be able to fund sales without increasing risk to your company.

Trade financing - In naming your commercial lending institution as loss payee on your policy, you could use a greater portion of your accounts receivable as collateral in obtaining corporate loans. This can help you increase the venture capital you need for world trade and other expansion initiatives.

Credit enhancement - There are also special programs available for bank securitization / asset-based lending program. If you have an existing securitization program, a credit insurance enhancement could increase the funds made available to you by securing excluded concentrations of risk in your accounts receivable portfolio. To find out if you are eligible for this program, contact Gene Ferraiolo by phone at (610) 353-1785 or e-mail at gene.ferraiolo@traderiskgroup.com

Global credit management - With a special global policy in place, you can streamline your credit management for your company and subsidiaries worldwide under one, convenient policy.