Is credit insurance a waste of money?

I have often been asked if this is the case. Over many years, I have come to the conclusion that providing that you exercise good credit control, then the extra cost of credit insurance is usually not justified.

Why do I say this?

Because credit cover is granted once a year. At that point, the underwriters will cover certain credit worthy accounts. Based on that profile, an annual premium is set. Unfortunately, if any of the companies that were covered on day one (even blue chip accounts) files poor results and their credit rating declines, the underwriters can give you notice that cover will be dropped.

Often the relationship with such customers is long term, or there may be a long term contract in place. So it’s then that you begin to start wondering what you have paid for.
So even if you are credit insuring household name customers to avoid a potentially disastrous bad debt situation, you still may find that you are not covered should they finally go bust!

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