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Credit Insurance: An Introduction

As we enter a period of economic uncertainty, it’s vital to consider ways to protect your business’s cash flow in order to safeguard future success. Credit Insurance can play a key role in this, allowing your business to thrive even in the most difficult times, as Account Executive Ed George explains.

Has your business ever suffered because a customer went into liquidation and was unable to pay you?

As the UK economy contracts in the wake of the coronavirus pandemic, you may have increased concerns about the liquidity of your customers and clients and their ability to pay your invoices on time – or at all.

Credit Insurance is designed to protect your business against this eventuality by paying for any financial shortfall (subject to the terms of your policy).

But first, let’s take a look at what Credit Insurance is and how it works.

What is Credit Insurance?

Trade Credit Insurance is a policy that protects your business by covering your income over a 12-month period, protecting your cash flow. Policies may provide cover for a late payment or the inability to pay.

For instance, if your customers become insolvent and cannot pay what they owe for goods or services, your policy will cover the loss up to a pre-agreed limit.

How does Credit Insurance work?

Insurers make an assessment of the financial health of your customers, before calculating the maximum amount of credit they will cover in the event of non-payment.

Insurers continue to monitor these customers, increasing or decreasing the amount of cover they provide in line with performance. These changes will be communicated to you, so you can make decisions around ongoing trading relationships.

As an insurance broker, we can help manage that relationship and advise on next steps. For instance, when you sign a new customer, we will liaise with your insurer, who will either confirm or deny cover for these customers and the limits provided. If a customer fails to pay, we will help you make your claim and work with the insurer to achieve a suitable outcome (providing you have complied with the terms of your policy).

Who is Credit Insurance for?

Trade Credit Insurance is for businesses of all sizes, from freelancers to large, multinational organisations. Policies can be tailored to cover either specific customers or all customers.

What are the benefits of Credit Insurance?

There are several benefits to Credit Insurance. The main ones are:

1. Cash flow protection: Helping you to plan for the future.
2. Improve your competitiveness: Ensuring your cash flow is always in hand when markets are struggling.
3. Grow your business: Make investments without worrying about customers defaulting on payments.
4. Trade with confidence: Some insurers monitor your customers’ financial health and provide you with updates so that you can trade with confidence

How much does Credit Insurance cost?

The price of Credit Insurance varies depending on your business, the customers you work with and the amount of credit covered by your policy.

However, it can be a valuable investment, especially in the current economic climate, where you could lose significant sums if one, or several, of your clients default on a payment.

Why choose One Broker for Credit Insurance?

We work with a specialist insurer, which has many years’ experience arranging this type of cover. Working together, we’ll ensure your business has suitable protection during challenging times.

Want to know about how Credit Insurance can help to support your business? Contact Ed to discuss your needs on 01223 949027.

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