The explanation ofa solid credit insurance

We are happy to explain to you what a solid credit insurance is and what the financial security can do for your business.

What is a credit insurance?

What would happen if one of your major debtors would not be able anymore to pay for outstanding invoices due to insolvency? What would this mean for the financial health of your company? Something every entrepreneur knows, is that the market keeps surprising us. Even from the most unexpected corners, problems can occur. As an entrepreneur, you want to confine the financial flow of your business as good as possible, as long as this is not going to cost you too much money. Not every problem can be avoided. However, most problems can be solved in a sustainable way.

A credit insurance is an insurance that can be applied per transaction, debtor or even complete turnover. The insurance ensures that the business will receive outstanding invoices, even if the debtors can not pay.

What does a credit insurance entail?

A credit insurance is a supporting part of the debtor management. Because of this, a credit insurance can be called a debtor insurance as well. The insurance is taken out to cover potential risks. This offers your business the full security that your outstanding invoices will be paid, especially in worst-case-scenario’s. One of the big debtors going bankrupt at instant, which causes remaining unpaid outstanding invoice, could happen at any organization. This does not only cause insecurities for you, but could cause problems for your business as well.

An outstanding invoice is not being paid, what to do now?

When one or more outstanding invoices are not paid, the collection agency will act decisively. Firstly, the collection agency will make an attempt to get the invoice paid. This is a professional process without scaring your debtors by sending a debt collector. Good and clear communication are success factors in this process. The collection process is covered by the credit insurance.

Only when this collection will not succeed, due to bankruptcy for example, the credit insurance will come into force. While normally you would never have seen your money back again, you now get the entire amount payed out by your insurer. With a credit insurance, you are insured for financial damage due to default. The financial continuity is secured and your cash flow remains guaranteed. 

When do I need credit insurance? 

Many organizations belief a credit insurance is only profitable for big organizations. However, the size of your organization does not matter. You can take out a transaction policy, debtor policy or a turn-over policy. Customization is the integral factor when taking out a credit insurance for your business. Moreover, for the time being, many think the cost price of a credit insurance is 1% or even 2% of the turnover. Nothing could be further from the truth. The price is only a fraction of the turnover. 

At first, the credit insurance checks the creditworthiness of a debtor. The company could anticipate on the creditworthiness and determine more flexible paying terms to create a competitive advantage. Or, if deemed necessary, be on top of it at all times. Because of this, the organization has a grip on the current situation, but on possible developments, like the creditworthiness of new debtors, as well. Do you want to know more about the benefits of a credit insurance?

Moreover, a credit insurance offers a collection system that is covered entirely by the insurance. If payment remains outstanding, the collection department of the credit insurer will yet attempt to claim the outstanding invoices. If this does not have the desired effect, the last part of the credit insurance will come into force. The credit insurance offers coverage and the organization is insured for potential financial damage caused by default of debtors. 

Is a credit insurance interesting for me?

Below, a real-life scenario is displayed from an organization that, before becoming client of The Credit Insurers, had not taken out a credit insurance; The organization in question had a relatively large debtor with whom a fruitful relationship was build over the years. Non-payment was out of the question, payments were carried out successfully for the time being. Out of the blue, the debtor in question was declared bankrupt. The outstanding invoices of a total of €35.631,- could not be payed or claimed. The organization needed to gain, with a profit margin of 20%, over 178.000,- extra turnover to cover the losses. With the current credit insurance prices, the policy would have cost a bit short of €5000,-. Do you want to know why you should take out a credit insurance? Read more at “why take out a credit insurance”?

Want to know more?

Many organizations choose to become one of our clients only after one of these scenarios has occurred. Although the choice to contact us is the right one, it is of great importance to avoid these situations in the first place. We do not only want to, but are able to offer customized credit insurance through which we can guarantee optimal cash flow for your business.

Do you want to know what a credit insurance and The Credit Insurers could mean to you, and do you want to take out a credit insurance? We are happy to personally inform you about this in free consultation without obligations. Contact us here!