Credit Insurance Definition
Credit insurance provides protection in a number of ways. Get all of the details about this insurance before you make a purchase. Details may vary from one insurance carrier to the next. Talk to five or six carriers to see who has the lowest premiums and which carrier can help you meet your goals.
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Credit Life Insurance
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Credit insurance, also called credit life insurance, is normally purchased by a consumer buying a large-ticket item, such as an automobile or a mortgage loan. If the borrower dies the loan is automatically paid off. If there are joint borrowers on the loan the policy can cover one or both. The premium is larger with coverage for two people. The premiums are normally financed into the loan total.
Business Credit Insurance
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Business credit insurance is also referred to as accounts receivable insurance or bad debt insurance. This insurance minimizes risk for a business when it makes sales or extends credit to customers. If a customer files bankruptcy or doesn't pay for other reasons, credit insurance will cover what is owed.
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Flexibility
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Business insurance policies are flexible. They can cover specific items or events within domestic or international business, for small or large companies. You can design the policy to cover a product line, large orders, small orders or your total receivable listings.
Function
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Some business credit polices provide coverage when there is an asset transfer to another customer; others offer coverage even if an unsatisfied judgment is pending for a customer. Working internationally can lead to risks such as war, natural disasters, embargoes or currency conversion problems. Credit insurance will help protect your business in these instances.
Sales Growth
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Credit insurance can lead to more sales and larger sales. If you know that insurance will make payments if the customer defaults, you will be more likely to increase a customer's credit limit. Customers with larger limits can buy larger orders, leading to more profits in the long run.
Cost Effective
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Consider factors in your policy that will save you money. If your policy is set up for co-insurance, then you are sharing the expense. If you incur a loss the policy will cover your receivables for 80 percent to 95 percent of the claim. In setting deductibles, carriers typically look at previous losses or bad debt that a company has incurred. Review provisions that cover a qualifying loss--the minimum loss the policy will cover.
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