A business can purchase trade credit insurance for individual customers or as a blanket policy, covering a percentage of its receivables. Within a blanket policy, key accounts are identified for coverage. Once a policy is approved, the insurer sets a credit limit for each account and monitors them closely using proprietary risk management tools. If a customer appears to be in trouble, the insurer notifies the policyholder and will usually either reduce the credit limit or tighten the credit terms. In the event of a default, most policies provide full payout, minus a 10% deductible.
Obtaining Business Insurance is already the 9th step on MyNewCompany.com’s Start-Up Checklist. It is always recommended to obtain a general Business Insurance Policy after starting your business. Trade Credit Insurance can provide an added safety net for your company beyond what is covered with a general policy.