A business works in tandem with several stakeholders including those entities whose operations run on credit. This makes it essential for businesses to be protected from all kinds of risks and eventualities associated with credit – including customer defaults, insolvent buyers and political uncertainties which may impact business ties and eventually, the business.
The team at Aditya Birla Insurance Brokers can help your organization with Credit Insurance Solutions for protecting your business from trade related risks. This unique risk management solution safeguards your business from financial risk occurring due to non-payment of trade related debts. In a nutshell, our protecting solution will ensure that your business doesn’t suffer a setback in case any of the associate ties fails to make a payment
Our team is available to assist you with their knowledge and expertise on credit insurance. We can help you determine identify potential risks and plan how best you can protect your business from financial risk.
What is credit insurance?
In a nutshell, credit insurance is a protecting solution that safeguards your company when your customers default. This insurance policy will cover the sales of the companies to its buyers on credit against the risk of loss due to the insolvency of their customers.
A business has multiple external stakeholders and a protecting solution like credit insurance has the potential to play a vital role in the trading cycle of any company. Many companies suffer financial setbacks due to unpaid invoices. Adopting an insurance plan can help your business by protecting profit, cash flows, sales growth, the balance sheet and a company's customer base. It can assist in the growth of sales by allowing the secure development of new buyers, new markets and the credit extended to a buyer. Credit insurance is recommended for manufacturers and wholesalers who offer credit to on-shore and off-shore customers.
What does a Credit Insurance Policy cover?
A Credit Insurance Policy will protect a business against the risk of non-payment when a customer becomes insolvent.
- Political Risk
Any sort of political risks which could result in customer defaults can be covered under a credit insurance policy. These risks can include natural disasters, war, import and export restrictions or even license cancellation.
Benefits of Credit Insurance
- Identify potential risks
A credit insurance service will evaluate and analyze an organization’s vulnerability to potential risks before suggesting a suitable sum insured and premium plan.
- Safeguard your company from defaults
Many times, recovering losses occurring because of defaulting customers and associates is beyond an organization’s control. A credit insurance plan can help an organization from sinking by covering the cost of such loss.
- Explore new markets and acquire new buyers without worry
One of the most important benefits for a company purchasing Credit Insurance is the fact that they can leverage on their potential to expand their business to new markets and newer buyers without worrying about defaults. With the protection of a credit insurance policy, a business can offer credit to new customers.
What is excluded under a Credit Insurance Policy cover?
A Credit Insurance Policy will not cover losses in case of the following eventualities –
- Disputes with the buyer leading to withholding of partial or full payment
- If the defaulting customer is a department of the State or Central government
- Cost to resolve dispute between buyer and insurer
Sum Insured and Premium
The sum insured and premium for a Credit Insurance policy will be determined on the basis of size of the trade, number of customers, history of claims, type of business etc.