Trade credit
Trade credit insurance, is, speaking briefly, a protection against a dishonest contractor. Late payments can ruin the liquidity of each company, in particular of small and medium-sized businesses. Credit insurance is useful to all those who sell any goods and allow contractors for delayed payment terms. If we happen to meet a dishonest contractor, we are sure that the money from unpaid invoices shall be paid by the insurer we have settled a contract with.
If our company does business in Poland only, we need a policy valid in Poland only. If we export goods, we should think to extend the territorial scope of the contract. We can conclude an insurance policy contract for the so-called "whole portfolio" - then the contract will apply to each of our customers. We can also include only a few trading partners in the insurance coverage. Remember to make sure what is the maximum sum the insurer is responsible to pay for unreliable contractors.
The contract is usually settled for one year. Premium depends above all on the scale of the company business - what amount of goods and services the company sells. The contract provides protection against unfair partners, but also against the bankruptcy or insolvency of the contractors. We are obliged to provide the insurer with any information on any circumstances that will occur during the contract and that could increase the probability of damage. Remember that in addition to a compensation, the insurer may also monitor the financial situation of our trading partners. Thus we can react in advance to any adverse events.
If damage occurs, we should notify the insurance company as soon as possible. In this case a damage is for example a situation when the payment deadline passed and the payer failed to pay the invoice. Damage can also be reported in case of insolvency of our partner. In such cases, the whole or part of (depending on the insurance contract) the invoiced payment should be transferred to our bank account. The deadline for compenasation payment is stated in the insurance contract.