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Frequently Asked Questions About Credit Insurance


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Want to know more about Credit Insurance? Then you must read this.

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Frequently Asked Questions About Credit Insurance

  1. 1. Frequently asked questions about credit insurance and Euler Hermes ACI
  2. 2. Frequently asked questions about credit insurance What is credit insurance? Credit insurance, also called accounts receivable insurance, provides your business with protection against the failure of your customer to pay its trade debts. This can arise because your customer becomes insolvent or because your customer fails to pay within the set timeframe. These risks are usually described as commercial risks. Companies that export can also protect themselves against a range of political risks that may prevent or delay payment. This arises when payment is not received as a direct result of a war in the buyer’s country, cancellation of a contract by the government of the buyer’s country, or when a government implements regulations which either prevent the export or import of the goods – or prevent or restrict the transfer of hard currency – from the buyer’s country. Is credit insurance new? Are there any sales minimums? No. Euler Hermes ACI, founded in 1893, From a practical standpoint, you generally is the oldest and largest underwriter of need annual sales of at least $1,000,000 business credit insurance in North America. to make the program cost-effective. The demand for credit insurance has grown Who uses credit insurance? substantially in the past several years. Euler Hermes ACI insures over $100 billion Any business selling on open account terms of business-to-business transactions. to other businesses can benefit from credit insurance. Euler Hermes ACI’s customers What credit terms can be protected? range in size from small businesses to large, Business credit insurance is for short-term multi-national companies. Firms in most trade accounts receivable, those due in less sectors of the economy – including business than one year. services as well as those trading in goods – use credit insurance.
  3. 3. $2,000,000 to make up for the lost profits. More Why should I consider credit insurance? importantly, the lost cash flow could be devastating. On average, 40% of a company’s assets are in the Non-payment weakens your company and lowers its form of trade debts. Sometimes the figure is far investment capacity. A credit insurance policy helps higher. It is very difficult for a company to predict in the management of your accounts receivable and which client will default on payment. Close to 50 compensates you in the event of non-payment. percent of all payment defaults arise from vendors with whom stable and long-term trade relationships Can I cover just the accounts I am have been established. The cost to a business of worried about? non-payment can be considerable. For example, if No insurance program can work over the long-term a company’s profit margin is 5 percent and one of if only questionable buyers are covered. But more its customer defaults on a debt of $100,000, the specifically, no one can accurately predict when a company will have to produce additional sales of company may fail. Euler Hermes ACI underwrites on a whole turnover basis. This provides the biggest value to its clients and supports a long-term relationship. What are the benefits of credit insurance? There are many benefits including: • Better credit control and protection against catastrophic bad-debt losses • Better risk management through an “early warning system” bolstered by the Euler Hermes database; A credit insurance • Better business planning through the elimination of unknown risks; • Improved working capital from your lender because you policy gives you have enhanced the quality of your accounts receivable with credit insurance; peace of mind • The benefit of Euler Hermes ACI’s debt collection capabilities and network; and and complete • Improved cash flow, because you receive payment for unpaid accounts receivable that are insured. confidence to grow How much does credit insurance cost? For the most popular policy, the premium is calculated on a your business. percentage of your sales. This rate is generally less than 1%, depending on the trading history and historical debt loss of your company, your trade sector and your customer base. When political risk coverage is included, the premium may be higher. Given that the average level of bad debt experienced by companies is approximately 0.7% of sales, the majority of businesses will find credit insurance to be highly cost-effective, even before taking into account the many additional benefits in the areas of sales development, risk and credit management and bank financing.
  4. 4. What is the level of indemnity? Are any services available on-line? The level of indemnity typically ranges from 80%-100%; Yes. With EOLIS, Euler Hermes ACI’s on-line policy however, the level varies depending on the policy management system, you can make credit requests, you select, your credit management experience, your file a claim, and monitor your claims any time you accounts receivable portfolio, and your premium target. want via the Internet. What if my company hasn’t experienced Can you recover unpaid bills on my credit losses? company’s behalf? Protection from bad-debt losses is just one of the Yes. Euler Hermes ACI offers a debt collection service benefits of credit insurance. When your receivables to its customers. are insured, you can also: Why choose Euler Hermes ACI? • Safely expand sales Euler Hermes ACI’s experience is unsurpassed • Secure better borrowing terms with lenders in North America. For more than 100 years, • Reduce bad-debt reserves Euler Hermes ACI has protected companies in nearly • More confidently achieve financial objectives every industry against unexpected bad-debt losses. As North America’s largest credit insurer, and as a If I incur a loss, how soon will a claim member of Euler Hermes, the world’s premier credit be paid? insurer, the Euler Hermes Group has unparalleled Generally, the claim will be paid within 60 days on access to proprietary information and global risk a domestic loss. Export losses may take a bit longer management expertise. because of country waiting periods. However, if the export loss is an insolvency, it will be paid within 60 days of the date of loss. Is it hard to apply for business credit insurance? No. Simply complete an application and forward it along with a recent aging of your accounts receivable to your Euler Hermes ACI agent or insurance broker for a detailed quote. Or, visit the Euler Hermes ACI web site at to get a free, no-obligation quote. To schedule a meeting with a Euler Hermes ACI representative, please call 877-909-3224.
  5. 5. North American Offices Mexico Eastern US Central US Canada Western US Mexico City Baltimore, MD Chicago, IL Montreal, PQ Los Angeles, CA 52-55-5520-0101 877-909-3224 877-904-3224 877-509-3224 877-901-3224 New York, NY Atlanta, GA Toronto, ON Dallas, TX 877-884-3224 800-527-0346 877-511-3224 877-905-3224 Euler Hermes ACI 800 Red Brook Boulevard Owings Mills, MD 21117 Tel 877-883-3224 Fax 410-753-0952