What is credit insurance?
Trade credit insurance is a tool to reduce the risk of nonpayment by your customers. With growth in sales in domestic and international markets, companies and financial institutions are faced with increasingly higher risks of non-payment, constraints on working capital, and unacceptable concentrations of accounts receivable. Unpredictable changes in government policies towards foreign creditors, outbreak of wars, and/or revolutions, can put your overseas obligations at risk. Credit insurance is a risk management tool that can provide support for the trade expansion you seek.
Why use credit insurance?
Credit insurance enables you to:
- Transfer the risk of nonpayment to the insurer
- Alleviate buyer risk concentration issues
- Reduce balance sheet and earnings volatility by mitigating risk of nonpayment
- Access loans and credit terms from banks and financial institutions
- Extend credit terms to customers and increase sales and profitability
- Access our knowledgeable credit risk professionals
Who uses credit insurance?
If you are selling your products and services on credit terms to domestic or foreign trade partners, or financing such transactions, non-payment is part of the risk of doing business. Our clients are generally medium to large size companies or financial institutions.
What sales can be insured?
Insurance can be purchased to cover either export or domestic sales, or a combination of both.
What sales can't be insured?
Typically insurers won't accept the commercial risk on sales to subsidiaries or affiliates. Not all products or credit terms may be insurable.
Does the policy support lending?
Policy claim payment proceeds can usually be assigned to a lender, and the insurance can result in reduced financing costs, a larger borrowing base and a larger advance rate.
Is there a minimum sales required?
To make the program cost effective, domestic sales of at least $20 million or international sales of at least $7 million is recommended.
What coverage options are available?
You can purchase credit insurance for:
- An entire accounts receivable portfolio
- A group of (generally larger) named customers
- Sales to a single customer
- Risks on a single contract
What is the level of indemnity?
Depending on the credit insurance program, the indemnity normally ranges from 80% to 95%.
What risk does the insured keep?
The insured is responsible for coinsurance and the amount of the policy deductible, where applicable, as well as amounts that exceed the policy limits.
Buyers & Credit Decisions
With a Trade Credit policy do I still make my own credit decisions?
With Multibuyer policies, most of the credit decisions can be made by the insured under the terms of the Discretionary Credit Limit (DCL). Under Key Account and Single Buyer policies, the credit limits are generally set by the insurer.
What is a DCL?
Multibuyer policies generally have a Discretionary Credit Limit (DCL), a policy feature that enables you to make your own credit decisions on many of your customers. Because the DCL permits you to use many of your standard decision making tools, it integrates easily into your existing credit management procedure and controls.
When can I file a claim?
All policies have a waiting period after default before a claim can be filed. This can be as short as 90 days after default, but can be longer under certain policies.
What is the deadline for filing claims?
Generally the deadline for filing a claim is 240-360 days after the due date.
How long must I wait to get paid?
Claims are typically approved within 60 days of receipt of a complete and satisfactory proof of loss and supporting documentation. At the time of a claim approval and payment, the insured must sign a release and assignment form assigning the debt to Great American for collection.
Cost of credit insurance?
Premiums are generally charged either as a percentage of sales or as a per annum rate on limits. Premium rates are influenced by various factors including country risk, obligor risk, length of payment terms, and your loss experience.
Are there any other fees involved?
Trade Credit policy costs are clearly stated. Unlike some credit insurers, we do not charge additional fees for underwriting credit limits or in-house collection of bad debts.
We understand that an insurer's reputation for handling claims and collections is an important part of the purchase decision. Our trade credit professionals have been paying claims and collecting bad debts for over 50 years, and we value our longstanding track record for handling claims fairly and timely.
Claim Filing and Adjustment
The waiting period before claims may be filed on Trade Credit policies can be as short as 90 days after default on a payment obligation, but can be longer under certain policy structures. During the waiting period the insured is expected to undertake its normal collection efforts including making written demand for payment on the obligor and any guarantors. Great American stands ready to assist our insureds with pre-claim collection efforts at no additional cost to the insured with our in-house collection efforts. There is no requirement for overdue accounts to be turned over to us for collection during the waiting period.
Collections and Recoveries
With Trade Credit insurance you can take advantage of our expertise in collecting delinquent obligations both domestically and internationally. Dealing with uncooperative debtors that hide behind excuses or their debtor-friendly legal system is an everyday activity for us, and we have a solid success rate in collecting. In the process, we have helped our policyholders recover millions of dollars for their own account related to coinsurance, deductibles and transactions made in excess of an approved limit.
We regularly endorse Financial Institutions as loss payees under our policies to facilitate our insureds' financing needs. As a loss payee the Financial Institution acquires certain rights to receive claim payments and file claims. Learn more at Financial Institutions - As a Loss Payee.
Company Products Applications
Multibuyer Policies insure a reasonable spread of your international and/or domestic sales of goods and services.
Single Buyer Policies allow you to cover a select transaction or contract. Our principal single risk policy types are:
Financial Institutions Products Applications
Products for Companies
- Multibuyer Non-Cancelable Limits Policy Brochure
- Multibuyer Pay-As-You-Go Policy Brochure
- DCL Features Brochure
- Single Buyer Policy Brochure
Products for Financial Institutions
- Single Buyer Brochure
- Purchased Receivables Policy Brochure
- Payables Financing Policy Brochure
- Letters of Credit Policy Brochure
*Please be sure to complete both parts of the Multibuyer Application
*Applications may vary in some of the states according to the regulatory requirements - please contact us with any question