Credit Insurance - how to survive in a rocky economyJul 15, 2013
What is credit insurance?
Credit insurance is basically a method to protect your business or your personal liability. If your company is involved in financial relationship with another company in such a way that it owes your company money, you have an option to protect your financial balance with credit insurance. Credit insurance rates have been quite expensive back in a day, and even though now they’re more available, they are still is a matter worth of thinking it through.
To describe it briefly, what happens when you take, say, a trade credit insurance is you sign a deal with an credit insurance company and pay a monthly fee, the amount of which is based on the creditworthiness of the company that took credit from you, and on how big the credit is.
Another side of the coin - but also a good one
There are a few types of credit insurance though, because there are, simply, more types of credits then just one. As an example how credit insurance be of use to you in a completely different situation, imagine this. You, as a single person, have decided to apply for a personal loan. During the procedure you might be asked if you would also like to take (to buy, basically) a credit insurance, if it is not already in the contract. In this case credit insurance will protect the loan if you won’t be able to pay for it due to some dramatic and unexpected changes in your financial situation.
Making a decision
However, it should always be your choice, because it is, actually, against the law to add credit insurance to your contract without warning you about this and explaining it to you.
In both of these cases credit insurance companies are providing a great service to both parties. If you are deciding whether or not do you want to protect your business’s stability (no matter on which side of a credit you are), then you should know that 18% of companies that went broke and even ceased to exist completely did so because they couldn’t pay for a credit or gave too much credit to companies that lately didn’t return the money.