What is Accounts Receivable Insurance ?
Definition of Accounts Receivable Insurance
Accounts Receivable Insurance is offered to businesses by commercial insurers as a kind of credit insurance. It can also be available in kind of key buyer insurance or multi-buyer insurance i.e., a pool of receivables. This insurance safeguards an organization when its customers become unable to meet their obligations towards organization. Accounts Receivable Insurance helps in strengthening the organization by increasing the borrowing capacity and provides help in expanding profitability and sales.
Brief Explanation of Accounts Receivable Insurance
Accounts Receivable Insurance can particularly be useful for start-up and fast-growing businesses that do not possess sufficient resources to implement credit checks. At a nominal fee, this insurance covers an organization against loss on irrecoverable receivables, including bankruptcy and default.
Accounts Receivable Insurance also provides protection to an organization that is facing difficulties in collection of its receivables because of loss of its underlying records due to fire.
Accounts Receivable Insurance related premium cost may vary due to many factors including the industry and standing of the business. The premium cost is also affected by the amount of coverage an organization is interested to purchase. Also, the cost of coverage for domestic businesses is lower than the international businesses.