It's interesting how we don't hesitate to insure our cars and homes, yet businesses do not insure their debtors (payments owing).
What would happen if your major client could not pay?
Questions you should ask yourself:
- Is my business exposed to one customer or a handful of customers?
- What would happen if one of my customers went bust, what will be the impact on my business?
Credit Insurance can protect you from bad debts both domestically and internationally. Widely used in Europe for many years, Credit Insurance is now being used as a tool by Australian businesses.
The types of policies vary widely from whole turnover through to catastrophe policies.
How does it work?
A premium percentage is paid to the insurer. Should a customer become insolvent, the insurer will pay the agreed percentage of the debt.
Generally, the percentage is around 80% of the debt, however, this can be higher depending on the type of policy you take out.
Additionally, export credit risks including foreign exchange risk and country risk that cause losses due to political and economic events beyond the control of the exporter can be covered.
What will it cost?
The premium charged will depend on:
- Type of policy
- Industry you are in
- Quality and quantity of your customers