Accounts receivable insurance: a quick review

Accounts receivable (A/R) insurance is a form of credit insurance offered by commercial insurers to businesses to protect receivables should a customer not pay. A/R insurance can be particularly useful for new or rapidly growing businesses that cannot afford to perform credit checks. For a relativel...

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Bibliographic Details
Published in:Business Credit 2014-04, Vol.116 (4), p.46
Main Authors: Faust, Doug, Richard, Matt, Sparks, Michelle
Format: Magazinearticle
Language:English
Subjects:
Accounts receivable
Bankruptcy
Borrowing
Business insurance
Cash flow
Commercial credit
Credit departments
Credit insurance
Credit investigation
Credit managers
Credit risk
Customers
Decision making
Financial analysis
Information sources
Insurance policies
Insurance premiums
International finance
Lines of credit
Working capital
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Summary:Accounts receivable (A/R) insurance is a form of credit insurance offered by commercial insurers to businesses to protect receivables should a customer not pay. A/R insurance can be particularly useful for new or rapidly growing businesses that cannot afford to perform credit checks. For a relatively low fee, it protects a company against loss on receivables, including default, bankruptcy or simple slow payment accounts. In these cases, a portfolio policy may be enlisted. Types of accounts receivable insurance are: 1. catastrophic loss protection, 2. portfolio, and 3. specific accounts. Companies need to think ahead and evaluate what kind, and in what situations, they might need insurance, as carriers prefer to be involved prior to issues arising. A/R insurance can help avoid an unexpected significant negative impact such events can have on your company. For example, you would have to generate a significant amount of future sales at $0 profit to make up for a credit loss.
ISSN:0897-0181