What is Credit insurance and how does it work

Credit insurance simply refers to an insurance cover which a business owner takes to protect their business in case of failure of credit payment. Trade customers can break or make your business. This is why you don’t need to wait until your customers fail to pay your debt so you start looking for a way to sue them. With the credit insurance cover, you can just relax and see your debts serviced.

How does it work?
Just as any other insurance cover, you will start by signing up the contract with a credit insurance service provider. You probably know the possible risks that your business can face as far as credit purchases are concerned. For instance, if you operate in a state where there is political instability, you can easily look forward to clients who won’t be able to pay their debts due to political unrest. This is what your insurer should cover. Depending on the intensity of the risk you outline, you will have to pay a given premium amount every month.

The contract is very strict that you must pay the premiums without fail. In case of risk, the service provider gets to pay for it on your behalf on two conditions. First, the loss must arise from the exact risk covered. Secondly, you must have paid your premiums to an up-to-date record. If you don’t meet the two conditions, you are not likely to be compensated.

Before you sign for any credit insurance cover, you ought to consult a financial adviser to help you make the right decision since if you cover a risk that is not likely to happen, then you might pay premiums but in vain.