• Credit Insurance may prevent you from customer failures and "scrutinize" your customers.
• Credit Insurance manages claims and litigations.
• Credit Insurance indemnifies your company in case of customers failures or bankruptcies.

Prevention diagram

In case of non-payment

Today, numerous companies offer 3 main types of contract as far as credit insurance is concerned.

Credit insurers have to follow three incremental steps :

Phase 1 of credit insurance : Prevention and surveillance

The company ( the seller ) asks the credit insurer different levels of coverage on its customers or prospects. The credit insurer evaluates the risks and delivers a credit note: accepted, limited credit line, refusal. Thereafter, credit insurers will follow up the ratings of the customers.

Phase 2 of credit insurance : Failures

In case of litigation or failure, the company must alert the insurer ( between 2 and 4 months ) after the previous payment term tied to the unpaid debt. The credit insurer is subrogated through the rights of the insured company and may settle debt collection procedures by any means.

Phase 3 of credit insurance : Indemnification

After 3 or 6 months ( insolvency period ), the credit insurer may indemnify the company ( seller ) according to the credit lines and the indemnification quota. To manage potential insolvency and credit risks is directly tied to companies’ survival. Receivables may represent a huge part of your assets. It must be “protected” like any other fixed asset. In Europe, more than 20% of bankruptcies are due to the insolvency of a customer.

Credit insurance helps you to :

• Enlighten the path of young companies through appropriate data about prospects.

• Give you weight and competing arguments when you have to face bad payers.

• Comfort financial partners through indemnification delegations.

• Prevent you from bad debts

Any company having to deal with receivables and credit terms is supposed to be interested in credit insurance (or credit coverage).

The cost of credit insurance is a percentage of the turnover tied to credit terms. This percentage may vary between 0.1% et 1% of the turnover and depends on these following criterias :

- the global turnover
- where international customers are located
- customer specifications (retailer, wholesaler, industrial companies) 
- number of customers
- specific duties.

For lump sum contract, roughly speaking, costs are necessarily higher than 1500 € per year.