International credit insurance refers to coverage that safeguards a business against losses arising due to non-payment of debt by global customers. This brief write-up will educate you on the primary risks this insurance can help you cushion against.
4 Common Risks that an International Credit Insurance Can Cover
The following are the major risks that international credit insurance can insure themselves against.
Invoice non-payments
A trader should purchase this insurance coverage to seek compensation when their international customer fails to pay a pending amount. The insurer will indemnify you to ensure your business keeps running.
Political unrest
Insurers understand that political risks may scare away customers before they clear all the unpaid invoices. Usually, this internal factor may trigger unforeseen issues like unexpected currency restrictions.
Customer’s bankruptcy
A businessperson can claim compensation if an international customer fails to pay all pending invoices because of insolvency.
Trade interruption
Unforeseen factors like political instability may lead to border closure, exposing you to the risk of financial loss. However, compensation only applies if the interruption continues beyond the agreed payment date.
How Can an International Credit Insurance Broker Help an Entrepreneur?
Attending scheduled meetings
An international credit insurance broker can represent a trader to their insurer, especially when they’re busy. The broker will negotiate monthly premiums and other terms of this form of insurance.
Explaining insurance needs
Secondly, this insurance professional can articulate their client’s needs to the insurance company. Similarly, they elucidate the trader’s future expectations to ensure they have enough coverage against financial loss.
How International Credit Insurance Policy Really Works in 2024
Submission of information
Firstly, the international credit insurance company requests information about the trader and their clients, including global customers.
Financial Health Assessment
The insurer will find out the current financial situation of the client in question and determine a suitable credit limit.
Customer monitoring
The employees of the international credit insurance firm track international clients 24/7 and cover all domestic customers.
Insurance claim
Lastly, a trader can contact the insurer directly or through a broker to demand compensation over an unpaid invoice(s). However, you only deserve these services if the international clients fail to honor the payment agreement.
Conclusion
In closing, the premiums of an international credit insurance policy are more budget-friendly than many would think. Therefore, entrepreneurs should apply for this insurance to trade with local and international clients without fear. However, you must know that the payable premiums depend on the included risks.