Credit insurance is becoming quite popular with many businesses. As a business owner, you might figure that your business could benefit from this new addition. However, you should not rush into getting it without first establishing whether it is suitable for your business or not.
You need to analyze your business and decide whether you really do need to get credit insurance. If you have been making many losses because of defaulting customers, then you will want to look into this. Talk to the insurance provider to find out about all the advantages and disadvantages and you will be able to decide whether you want to go ahead and get the insurance.
Credit insurance ensures that you do not lose money even when customers default. You will be transferring all the risk associated with giving of credit to a third party - the insurance company. This is a good deal but you will still have to pay a monthly premium for this service so you need to be ready to make that sort of sacrifice.
Getting this insurance does not mean that you can be reckless about who you offer credit too. In fact, together with your insurance provider, you will have to decide what kind of customers can be offered goods on credit. You will also have to decide on the credit limit that you are all comfortable with; these measures will ensure that you never suffer losses that you cannot handle.
You will be paying premiums just like all regular insurance programs. You need to keep in mind that this sort of insurance is not available for individuals and it only covers businesses. The premium you pay will be an agreed percentage of the sales you have made that month or of all outstanding account receivables.
If you decide that this is the right move for your business, you should go ahead with it. You need to be careful with how you conduct your business. Follow the set guidelines and this could be one of the best decisions you ever made for your business.
Now, you must understand that getting yourself credit risk insurance is not a blank cheque for you to be reckless with how and who you extend credit to. You do not want to find yourself in a situation where all you are doing is chasing after defaulting customers at the expense of everything else. You must have definite terms of credit that are realistic, and that your customers will be able to adhere to.
You need to analyze your business and decide whether you really do need to get credit insurance. If you have been making many losses because of defaulting customers, then you will want to look into this. Talk to the insurance provider to find out about all the advantages and disadvantages and you will be able to decide whether you want to go ahead and get the insurance.
Credit insurance ensures that you do not lose money even when customers default. You will be transferring all the risk associated with giving of credit to a third party - the insurance company. This is a good deal but you will still have to pay a monthly premium for this service so you need to be ready to make that sort of sacrifice.
Getting this insurance does not mean that you can be reckless about who you offer credit too. In fact, together with your insurance provider, you will have to decide what kind of customers can be offered goods on credit. You will also have to decide on the credit limit that you are all comfortable with; these measures will ensure that you never suffer losses that you cannot handle.
You will be paying premiums just like all regular insurance programs. You need to keep in mind that this sort of insurance is not available for individuals and it only covers businesses. The premium you pay will be an agreed percentage of the sales you have made that month or of all outstanding account receivables.
If you decide that this is the right move for your business, you should go ahead with it. You need to be careful with how you conduct your business. Follow the set guidelines and this could be one of the best decisions you ever made for your business.
Now, you must understand that getting yourself credit risk insurance is not a blank cheque for you to be reckless with how and who you extend credit to. You do not want to find yourself in a situation where all you are doing is chasing after defaulting customers at the expense of everything else. You must have definite terms of credit that are realistic, and that your customers will be able to adhere to.
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