A customer who fails to pay can put pressure on your turnover, cash flow and growth plans. Credit insurance helps to mitigate this risk by providing insight into customers’ creditworthiness, support with debt collection and compensation should a covered claim remain unpaid.
As an independent credit insurance specialist, Xolv guides you in choosing and taking out suitable cover. We compare insurers on criteria such as credit limits, terms and conditions, cover and premiums, and also support you throughout the policy term. If you’d like to find out more about how credit insurance works, the different types available and the factors that determine the cost, please read on.
Credit insurance is insurance that protects your organisation against the risk of customers not paying their invoices. This could be due to bankruptcy, suspension of payments or long-term liquidity problems.
In brief: With credit insurance, you will still get your money if your customer can no longer pay outstanding invoices. For example, because of liquidity problems, bankruptcy or suspension of payments. So you protect your business against non-payment, preventing your own payment problems or continuity problems.
Besides paying out unpaid invoices, credit information and debt collection are also part of the package, making credit insurance more than worthwhile. Want to know which credit insurance is best for your situation?
Taking out and using credit insurance follows set steps, with the creditworthiness of your customers being a crucial factor.
A credit insurance application starts with understanding your customer's financial position. Every credit insurer, including the ones Xolv works with, has a database with up-to-date financial data of companies all over the world. This enables you to check online the creditworthiness check of your (target) buyers and debtors. This is done by analysing hundreds of economic, political, commercial and financial indicators.
Once the insurer has a clear picture of your customer's financial position, they will set a credit limit based on your needs before the delivery begins. This is the amount for which the credit insurer considers it justified to deliver on account to the customer in question. In addition, this is the amount for which you are covered if this customer fails to pay its invoices.
Then you can start doing business. In doing so, it is important that you always state the general terms of delivery and payment terms and record all agreements in writing. While you do business, the credit insurer covers the customer risks by continuously monitoring your customer's financial position. If necessary, they will adjust the limit in consultation with you during the process.
Whatever measures you take, it can always happen that your customer cannot or will not pay after a delivery. Not even when you send a payment reminder and a reminder. If that is the case, we will find out the reason for non-payment for you. Usually, an amicable solution is preferred, in which we can of course help you. A first step may be to stop supplying products or services, even if there is an obligation to supply on your part.
If the above actions do not help, then collection measures often necessary. The advantage of credit insurers is that they have their own collection agencies worldwide. This allows them - wherever and whenever - to put pressure on your buyers to make payment. Another big advantage is that credit insurers provide cover for multiple suppliers on the relevant buyer, which they reduce or withdraw upon collection. This puts additional pressure on the buyer to pay quickly.
If it turns out that your buyer really cannot pay or even goes bankrupt, the insurer will pay out the insured amount.
This ensures the continuity of your business.
Protect your turnover with the right cover. Our advisers will be happy to help you.
The benefits of credit insurance are not only in financial security, but also in better insight and control over your debtor risks. Below we list the main benefits:
Choosing the right credit insurer largely determines the quality of your coverage, conditions and support. In doing so, they protect your business against default, optimise your risk management and provide valuable financial insights. That is why we support you in finding the right partner, so that you can be assured of carefree business.
Exactly what credit insurance covers varies depending on the insurer, the policy and the circumstances. Not every type of cover is available for every business or risk. The overview below shows which solutions may be available. The policy terms and conditions, credit limits and exclusions always take precedence.
With whole-turnover credit insurance, you cover your company’s entire turnover. This means that the agreed insurable portfolio is insured against the risk of non-payment. By spreading the risk across the board, your cash flow remains stable and you are protected against non-payment across your entire customer base. Ideal for businesses with a broad customer base that want certainty regarding their income.
Sometimes it can be more efficient to insure only specific customers or customer groups. With selective cover, you choose to cover only those customers with higher risk. This provides targeted protection for key risks and can save costs compared to full turnover cover.
Project-based credit insurance allows you to protect payments within a specific project. Useful for sectors such as construction and engineering, where payments are tied to project deadlines. This way, you can be sure of payment even if your customer unexpectedly cannot meet agreements.
If your business is heavily dependent on one customer, single risk insurance offers a solution. This cover focuses specifically on the risk of default by a single key customer. This allows you to do business with confidence and remains protected if this customer defaults.
Do you deal with large purchase orders or payments to international suppliers? Prepayment credit insurance protects you against the risk of a supplier not delivering after payment. This prevents losses if your supplier is unable to meet its obligations, for example due to bankruptcy.
In customised or long-term production runs, there may be a risk that the customer will not pay in the end. Credit insurance at manufacturing and contract level protects your investments during production. Thus, you are assured of payment even if the customer cannot pay on time or at all.
Sometimes exceptional losses arise beyond the usual risk. "Excess of loss" cover provides a cushion against extreme losses above an annual deductible. This cover is a valuable addition for companies looking to protect themselves against unexpected or severe financial hits.
Doing business in international markets involves political risks. Political risk insurance protects you against events such as war, national unrest or government measures that could affect your deliveries or payments. With this cover, you remain assured of stable cash flow even in uncertain geopolitical situations.
Would you like more information on any of these forms of credit insurance or advice on which type of credit insurance best suits your situation?
There are still many misunderstandings about credit insurance, while practice often shows otherwise.
The cost of credit insurance is typically between 0.1% and 0.5% of your turnover. The exact cost depends on your turnover, any previous losses, the number of debtors you have (for risk diversification) and your debtors' countries of establishment, among other things. Although credit insurance is often thought to be expensive, in practice, insurance on outstanding invoices costs only a fraction of turnover. Moreover, these costs often do not outweigh the potential losses you may incur if you did not have credit insurance.
People think there is a lot of administrative burden attached to credit insurance. That is not correct. Of course, you will have to perform a number of actions, but these actually contribute to improving your debtor management and to reducing your debtor risks. Practice shows that in almost all organisations, credit insurance fits perfectly within the existing debtor monitoring. In fact, it often proves to be of absolute added value.
In the Netherlands, more than 80 per cent of all requested limits are issued by credit insurers. These are limits on outstanding to moderately performing companies. Really poorly performing companies or companies that do not want to provide information cannot be insured. It is the role of the credit insurer to test how creditworthy is a buyer. Both the credit insurer and Xolv will pull out all the stops for you to establish a limit on your buyer. However, when a credit insurer decides not to cover a buyer, it is wise to ask yourself: should I really want to do business with this non-creditworthy buyer?
This is a very outdated idea. Based on good disclosure, credit insurers can often still maintain cover on struggling companies. One of the most striking examples in recent years is the situation surrounding Vroom & Dreesmann (V&D). Days before V&D went bankrupt, credit insurers were still providing cover based on collateral and good ongoing disclosure. After the bankruptcy, the credit insurer immediately paid out the loss and was then able to recover the full amount from shareholders. Not providing financial data to credit insurers when things are going badly may seem logical but it certainly is not. It is precisely by not providing data that credit insurers are more likely to reduce or withdraw limits.
Want to know more?
Direct quotation request?
Directly transfer intermediation?
Concise product summary (PDF)?
A credit insurance is a type of insurance that protects businesses against the risk of customers failing to pay their invoices due to bankruptcy, suspension of payments or prolonged non-payment.
For companies with high turnovers and international trade flows, one large debtor can have a significant impact on cash flow and profitability. Credit insurance mitigates this trade risk and provides greater financial stability.
In addition, credit insurance strengthens the negotiating position towards banks and financiers, as outstanding debtors are seen as less risky.
When taking out credit insurance, the debtor portfolio, sector, country risks and turnover structure are analysed. On this basis, the insurer credit limits fixed per customer.
During the term, the insurer continuously monitors customers' financial situation. If there are signs of deterioration, a limit may be adjusted.
If a customer does not pay within the agreed period, a collection process is started first. If payment is not made, credit insurance pays out a pre-agreed percentage of the claim.
Credit insurance usually covers:
Unpaid invoices due to bankruptcy
Long-term default
Political risks in international trade
Commercial risks such as insolvency
The exact coverage depends on the policy conditions and the structure chosen.
As a guideline, costs are between 0.1% and 0.5% of turnover, but the exact rate depends on your customer spread, debtor risk and claims history. Get advice for a tailor-made estimate.
Credit insurance is particularly interesting for companies that:
Deliver on account
Handling high invoice amounts
Being dependent on a few large buyers
Operating internationally
Working capital financing through banks
Many people think credit insurance is expensive or administratively burdensome, or that it only covers good debtors. In reality, they are affordable, workable and flexible.
Credit insurance can be of interest to a wide range of businesses that supply goods or services on credit. These include SMEs and larger companies, businesses that rely on a few major customers, organisations with high invoice values, exporters, companies operating internationally, and project-based businesses with long payment terms. Credit insurance may also be relevant for self-employed individuals, provided they supply on credit and face a substantial credit risk. Whether credit insurance is actually suitable depends, amongst other things, on turnover, customer diversification, payment terms and the desired level of cover.