Information available by line of business
How does Business Credit Insurance work?

Unlike other types of business insurance, once a company purchases business credit insurance, the policy does not get filed away until next year’s renewal, but rather the relationship becomes dynamic. A business credit insurance policy can change often over the course of the policy period, and the credit manager plays an active role in that process.

The better-established credit insurers are “limits underwriters,” meaning that the policyholder’s more significant buyers will be analyzed individually and each assigned a credit limit for coverage. This is where the type and amount of information the insurer collects on a buyer plays a very important role in monitoring, because credit limits are assigned based on the information available about that particular buyer.

Throughout the life of the policy, the policyholder may request additional coverage on a specific buyer should that need arise. The insurer will investigate the risk of increasing the coverage and will either approve the additional coverage, or decline with a written explanation. Similarly, policyholders may request coverage on a new buyer with which they’d like to do business.

The credit insurance company will proactively monitor its customers’ buyers throughout the year to ensure their continued credit-worthiness. They do this by gathering information about buyers from a variety of sources, including: visits to the buyer, public records, information supplied by other policyholders that sell to the same buyer, receipt of financial statements, etc.

When signs indicate a company is experiencing financial difficulty, the insurer notifies all policyholders that sell to that buyer of the increased risk and establishes an action plan to mitigate and avoid loss. The ultimate goal of a business credit insurance policy is not to simply pay claims as they arise, but rather to help policyholders avoid foreseeable losses. If an unforeseeable loss should occur, the indemnification aspect of the business credit insurance policy comes into play.

In these cases, policyholders would file a claim with supporting documentation, and the insurer would pay the policyholder the claim benefit typically within 60 days from the date of loss.

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Since each policy is different, the best way to see "how it works" is to Contact Us.