IA Group Provides Legal Partnerships for Credit Insurance Companies

Credit insurance is a type of insurance that helps businesses manage financial risk. Also known as receivable or third-party guarantee insurance, credit insurance protects against loss from bad debt. The credit insurance market has grown in recent years with more businesses taking advantage of this financial risk management tool. In response to growing demand for this type of insurance, there has been an increase in the number of providers and availability of different policies.

Operating in any business environment can be challenging for small business owners. An unexpected event could have a negative impact on the operations of your business, especially if you have little savings or equity built up. With the use of credit insurance, you can protect your business from potential financial risks associated with extending credit to customers or suppliers. However, selecting the right credit insurance policy is not an easy task. Here are some tips to consider when shopping for a credit insurance policy:

Know your risk

When selecting a credit insurance policy, it is important to understand the risk associated with the type of business you operate. In general, the higher the risk in your business, the higher your potential credit loss will be. Some factors that can impact your risk include: – The industry you operate in. Industries such as health care, construction, and government contracting have a higher risk of bad debt than industries such as retail. – The type of customers you serve. Certain industries, such as utilities, have a higher percentage of customers who are behind on paying their bills. – The amount of credit extended to customers. The longer the payment terms, the higher the risk of a bad debt loss. – The average age of your customers. If your business has a high percentage of customers who are behind on payments, the average age of your customer base is important to consider.

Protect against loss of existing receivables

Existing receivables are accounts you have already extended credit. With credit insurance, you can protect against loss of these accounts by ceding them to the credit insurance company. Credit insurers will place a guarantee on these accounts, paying you the amount due if your customer does not pay. Pay attention to the following factors when selecting a credit insurance policy for existing receivables:

– The amount of coverage. The amount of coverage you select will depend on your risk tolerance. If you are a small business owner with limited equity or savings, you may want to select a lower coverage amount because it will not have a significant impact on your business.

– The type of coverage.

There are two types of coverage for existing receivables:
(1) full coverage and (2) proportionate coverage. Full coverage means that the credit insurance company will pay you the full amount due on the claim, not just the percentage of the claim that the policy provides coverage for. With proportionate coverage, the credit insurance company will pay the percentage of the claim that the policy provides coverage for.