• Prudence Insurance Brokers LLC

How Credit Insurance Can Be A Financial Tool For Businesses

Credit insurance is an important financial tool for the protection of financed sales to your business customers. However, not all companies have the same needs, so a credit insurer should be able to tailor its services to each context. This article explains how credit insurance works from a global perspective. Then it will show specific examples of how it is possible to adjust the different services to the particularities and requirements of each organization.


What is Credit Insurance?


Credit insurance is divided into three pillars of fundamental services.


  1. The risk analysis of the client portfolio

  2. The recovery of unpaid credits

  3. The compensation of those accounts that are uncollectible


Paradoxically, compensation is not the most relevant factor. After all, the protection of the solvency, liquidity, and financial viability of a business has as much to do with the assurance of the credits that have been granted to clients, as with the diligence with which the portfolio has been managed in your set. Lack of knowledge makes it difficult to take full advantage of the advantages of credit insurance.


The Ideal Options


It is best to opt for the policy that best suits the volume of your client portfolio and duration. Those SMEs with a more modest billing should opt for a rather simple and easy-to-manage policy format. Choose a policy that is specially designed for small and medium-sized companies that want to grow safely. For their part, companies with a higher billing volume usually require coverage that offers them more flexibility. Choose a policy that includes improved aspects such as free extensions without authorization, up to a maximum of 60 days, the setting of time limits in production campaigns, or the free re-study of clients. Large multinationals that have subsidiaries in various countries have complex situations and have the consequent need to personalize their credit risk coverage.


Conclusion


A company may require the protection of a specific element of its portfolio, instead of taking out global credit insurance or may need to protect from the risk of defaulting on accounts that the company has not yet been able to collect. That is why it is important that companies know the differences between credit and surety insurance. Ultimately, credit insurance and the services it consists of can provide a valuable service to your business. However, the insurer you choose must be able to offer the necessary flexibility to accommodate these services in the context and state of development of your business.


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