FAQ – Trade Credit Insurance
FAQ - Credit Insurance
Here you’ll find answers to the most important questions.
General Questions
What is credit insurance?
Credit insurance protects companies against bad debt. In other words, it insures against unpaid invoices resulting from customer insolvency, default, political risks, or other reasons.
Why do companies purchase credit insurance?
- Most suppliers use what are known as supplier credit arrangements when doing business with corporate customers. The customer receives the goods and services and must pay the invoice within a specified payment term. However, this practice poses a risk to the supplier, as the company’s liquidity depends on its customers’ payment behavior. If the customer is unable to pay the invoice, this can quickly lead to financial difficulties and, in the worst case, even to the supplier’s own insolvency.
- By using credit insurance, you can effectively protect your business against potential bad debt. If customer payments are delayed or fail to materialize, your credit insurance will step in and cover up to 90% of the outstanding receivables. To minimize the likelihood of such incidents, your credit insurer also regularly checks your customers’ creditworthiness, keeping you informed at all times about their financial situation and potential payment defaults. Now you can focus entirely on your business and benefit from growing revenue without having to worry about your company’s liquidity.
What are the benefits of credit insurance?
- Protection Against Bad Debts
- Ensuring the Company’s Liquidity
- Competitive Advantages Through Payment Terms
- Simplifying Business with Foreign Customers
- Expanding into new markets
For which companies is credit insurance suitable?
Trade credit insurance is suitable for businesses (B2B) of any industry and size.
When does credit insurance make sense for my business?
Are you a supplier or service provider who provides goods and services to your customers on credit? The following risks may arise in this situation:
- Your customers are not paying their outstanding invoices on time—or at all.
- Your customer files for bankruptcy.
- Due to outstanding payments, your company lacks the financial resources to pay its own bills, make investments, and/or carry out production.
2. Costs
How much does credit insurance cost?
The individual price of the policy depends on the volume, the payment terms you agree upon with your customers, your industry, your accounts receivable structure, and your prior loss history.
Which provider is the cheapest or offers the best value for the money?
There is no one-size-fits-all answer to this question. The pricing and coverage structure of your credit insurance policy depend on a wide variety of factors (industry, revenue, customer base, etc.). Another essential component of your credit insurance is the allocation of credit limits. To receive a non-binding quote, please feel free to contact our GFL financial experts, who will handle the next steps for you.
What other costs are involved?
In addition, so-called credit review fees may apply. Credit review fees are the portion of the costs associated with the credit or creditworthiness review that the insured company bears. They are typically charged by the credit insurer for the initial review and subsequent follow-up reviews and range from approximately 25 to 100 euros per customer per year.
Will my credit insurance get more expensive the more often I have claims with customers?
This depends on the specific terms of the contract you have with your insurer. We would be happy to review your current contract.
3. Terms of the Contract
What is included (by default) in credit insurance coverage?
Coverage for Goods and Services in the Following Cases:
- Protraced Default as an Early Insurance Claim
- Insolvency
- Bankruptcy
- Upon request: Political risks
Our company has subsidiaries. Can they also be covered under a credit insurance policy?
Yes, subsidiaries can be included in the credit insurance policy as co-insured parties.
Our company has subsidiaries abroad—can you also offer credit insurance solutions for them?
We can also find the perfect solution for your subsidiary abroad. Through our international network, CREDEA, we are connected with other credit insurance specialists around the world and are therefore able to find international solutions or refer them to our partners.
What payment terms can I agree on with my customers?
The credit insurance policy can be tailored to your individual needs in terms of payment terms. By default, the maximum payment term is 180 days.
Do I have to insure all my customers?
With standard credit insurance, all of your customers are covered. However, it is also possible to exclude individual customers or a specific group of customers from the scope of coverage.
What is a credit limit in trade credit insurance?
Each of your major customers must be registered with the insurer. During this registration process, the insurer determines the maximum amount for which goods and services provided to the respective customer are covered by insurance.
Can the credit insurance limits be removed or reduced?
If your customer’s creditworthiness deteriorates significantly, the insurer may reduce or revoke the credit limits granted. However, it is also possible to take out policies with non-cancellable limits.
Do I have to request a credit limit for all my customers?
The credit insurer distinguishes between so-called named and unnamed customers. Named customers are all customers who are reviewed by the insurer to determine the amount of the credit limit to be granted. Insured goods and services can be provided to all unnamed customers without review by the credit insurer. You are responsible for conducting this review.
Can public-sector customers also be insured?
Public-sector customers are not insured by default, but can be included in the insurance coverage upon request.
Can I insure individuals?
Private customers are not insured by default, but can be included in the insurance coverage upon request.
I operate a consignment warehouse to facilitate deliveries to my customers. Can I also include this in my credit insurance coverage?
Yes, coverage for consignment inventory can be contractually agreed upon when you set up your credit insurance policy. The GFL experts are available to provide you with more detailed information on this.
I have binding supply contracts with my customers. Are there ways to protect these contracts?
Yes, this can be covered by a special insurance clause following a review by a credit insurer. The GFL experts are happy to provide you with further information.
Can I insure my custom-made items?
Yes, your custom-made products can be insured. The GFL experts are happy to provide you with more information.
Will the credit insurer reimburse me for the full amount of the loss?
The credit insurer provides compensation within the scope of its coverage. This is typically 85–90%.
Is there a deductible for credit insurance?
Yes, there is a deductible. In the event of a claim, this is typically 10–15% and depends on the extent of coverage provided by the credit insurer.
4. GFL as a credit insurance broker
As a credit insurance broker, which providers do you work with?
We work with all German providers. We also have access to international insurance solutions.
Why are you the best person to contact or the best broker when it comes to credit insurance?
As an independent, owner-managed company, we have excellent relationships with insurers as well as the many years of experience and expertise needed to secure credit insurance for you and your business on the best possible terms. With us, you’re talking to fellow business owners.
Is the GFL independent of credit insurers?
As brokers, we are committed to absolute independence. We act solely in the best interests of our clients. As a result, we are completely independent of any insurers or financing providers.
Our Success Stories.
Here's what our customers say about us:
Insurance and Financing Coordinated with Each Other
“I appreciate the independent and professional support provided by GFL, and I’m happy to recommend them.” Andreas Bruthier, MHB
Additional Working Capital
“GFL has a high level of expertise in various fields, can create specialized solutions, and has an exceptionally strong network.” Gerold Lorenz, Interfer Edelstahl
Financial Consulting in a Growth Market
“GFL stands out for its expert advice, provided on an equal footing from business owner to business owner, and for the way it connects the various topics.” Marco Göbel, Ex-Trade
Do you have any other questions?
Please feel free to contact us!
If you have any further questions about credit insurance, please feel free to contact us.
