Credit Insurance provides protection to companies against customer payment defaults either by a commercial risk of protracted default or insolvency of buyer. In case of Export Credit Insurance the policy also provides cover for political risks including Embargo,Trade restrictions, Acts of War, Contract Frustration, Act of God perils, protracted default of stated owned entities.
As a matter of good credit management practice, it is imperative that a business entity ring fences itself from an eventuality of a credit default of a buyer.
The key advantages of buying Trade Credit Insurance are:
- 1. It protects your balance sheet by safeguarding bad debts.
- 2. It helps you taking more risks by expanding into new markets and expanding credit to more customers
- 3. Leveraging Insurer’s database, it can supplement your current credit management system in selecting a good credit rated buyer and exposure on a buyer.
- 4. It enhances your borrowing power.