Commercial Credit Insurance
What Does Commercial Credit Insurance Mean?
Commercial credit insurance is insurance coverage that aims to protect a business from possible losses and damages due to unpaid services and the potential catastrophic financial issues of bad debts.
Commercial credit insurance is also known as trade credit insurance or commercial credit indemnity.
Insuranceopedia Explains Commercial Credit Insurance
Because unpaid invoices may make up close to half of a company's assets, they can significantly reduce a company's cash flow and investment capacity. In response, commercial credit insurance protects businesses against the risk of commercial debt remaining unpaid. A policy would cover a range of clients and pay out a pre-determined percentage of an unpaid invoice due to bankruptcy, insolvency, or default. Depending on the business and its client portfolio, purchasing coverage for specific or key accounts may be an effective risk management strategy. Finally, it is important to note that coverage only extends to companies failing to pay, not private individuals' lack of payment.