Bad debt insurance

Bad debt insurance

Bad debt insurance is also offered under the alternative term trade credit insurance, or WKV for short. It protects against financial losses that may arise from the loss of justified receivables in a commercial enterprise.

Bad debt insurance: Who can take out insurance??

Whoever grants a supplier credit to his customers should seriously consider taking out bad debt insurance. It does not matter whether the receivables are large or small and recurring. One of the most underestimated risks is the loss of receivables from customers to whom one regularly sends smaller deliveries and whose outstanding receivables gradually add up. Bad debt insurance is often purchased by customers in the steel, construction, food, engineering and service industries.

The following businesses can take out bad debt insurance:

  • Trading companies
  • Service businesses
  • Industrial companies
  • Importers / exporters
  • Construction and trade companies
  • Agricultural businesses

How bad debt insurance works!

Bad debt insurance provides insurance cover for receivables from customers at home and abroad. The credit insurance secures open items from deliveries and services up to the amount of the requested or agreed premium. granted limit. The bad debt insurance always comes into play when one of your customers becomes insolvent or is in arrears with payments. By covering outstanding payments, you as an entrepreneur ensure that your own company does not get into financial difficulties as a result.

Your advantages by taking out bad debt insurance:

  • cost-effective and qualified credit assessment of your customers
  • Prevent bad debt loss
  • Liquidity protection
  • Increase cash flow

What does bad debt insurance cost??

The insurance premium for bad debt insurance is oriented u.a. on the claims history of your company and the industry in which you operate. The costs are usually in the per mille range. The annual turnover is used as a basis for calculation. Ultimately, however, the amount of the premium also depends on how the credit insurer assesses the risk of payment defaults. In order to be able to assess this better, some information about your customers' payment history and the industry in which they operate is necessary. At the end of this analysis, you will receive a quotation for bad debt insurance costs. The bad debt insurance costs therefore vary from one company to another. A statement on the premiums is only possible after an individual risk assessment.

Crucial to the cost, then, are:

  • Creditworthiness
  • Trade spectrum
  • Turnover
  • Payment history
  • Customer industries

However, because it is not easy to find the best bad debt insurance for you, we as insurance brokers are happy to provide objective support in the form of advice and assistance in comparing individual commercial insurance policies. Contact us so that we can optimize your bad debt insurance together and ensure that you are still comprehensively protected against bad debt losses in the future. With the credit insurance comparison you find your suitable insurance protection to the bad debt insurance.

Why do you need bad debt insurance?

Especially in the case of insolvency of companies, there is often a so-called cascading effect. If open receivables are not received, then an entrepreneur himself can quickly get into difficulties. This is also due to the fact that it often takes a very long time before insolvency proceedings are even initiated. In order to avoid getting into financial difficulties themselves, companies take out bad debt insurance. This then pays between 70-90% of the outstanding debt. But beware – when the child has fallen into the well, it is too late. Purchase bad debt insurance when you probably least think you need it. When the first failures are there, it is always difficult to insure ourselves.

Who can NOT be insured?

Not insurable in the bad debt insurance are companies with negative commercial information or with negative previous damage (z. B. Check / bill protests, foreclosure, affidavit, detention order), as well as:

  • Mail order incl. E-commerce
  • Continuing obligations, z. B. Renting and leasing (renting
  • movable things on demand)
  • Agents working for commission, z. B. Ad or trade broker
  • Collection companies, central billing offices
  • Management consultants, attorneys, members of tax advisory professions, auditors
  • Shipbuilding
  • Aircraft and spacecraft construction
  • Provision of financial and insurance services (factoring and
  • leasing company on request)
  • Travel agency and tour operator
  • Wholesale and retail of fruit, vegetables and potatoes

What does bad debt insurance cover?

Damages are settled by the bad debt insurance before the insolvency administrator can even decide on the distribution of the mass of an insolvent debtor. The bad debt insurance can be limited to customers inland as well as extended to customers abroad. Included in the indemnities of the bad debt insurance are not only the net invoice amounts of the delivered goods and services, but also the share of the VAT due on them is taken into account.

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