Credit insurance is a valuable cover to consider for your business. It provides cover to protect from customers who owe money for products or services, customers who don’t pay debts or those who pay later than agreed payment terms.
Our credit insurance jargon buster is here to help you decipher the commonly used terms found in a credit insurance policy. It’s not a complete list of all the words you might find, but covers some of the more confusing phrases used.
Aggregate First Loss
A limit set within a policy where a certain number of agreed claims are not payable by the insurer. This means the insurer is only liable for losses once the agreed total cost is exceeded. Accepting an aggregate first loss typically means a cheaper premium as the policyholder is taking the first part of the risk themselves.
If you need to make a claim, this is the amount that will be deducted from the claim.
This is when the buyer fails to pay within the timescale specified by the policy.
These allow policyholders to set their own credit limits without approval from the insurer as long as acceptable credit procedures are followed to justify the cover.
Each & Every
An amount taken from each & every claim payment to be kept for the account of the insured.
The percentage amount of the claim paid to the insurer
Maximum Extension Period (MEP)
The maximum amount of time the policy holder is allowed to extend the due date of an invoice. If the invoice remains unpaid at the end of the MEP, the account must be put on hold and reported to the insurer.
This is the maximum value of claims that the insurer will pay out during the policy period
Maximum Payment Terms
The longest credit period the policyholder can offer to a buyer or customer. An underwriter must approve longer terms if they are needed.
Also referred to as an excess, this is the minimum amount of each loss the insured has to accept for their own account but includes the un-indemnified 10%
Losses below this amount don’t qualify towards to the Aggregate First Loss value.
Risks associated with political and governmental factors, and the ways these can prevent payments. For example, due to political events, governmental confiscation of assets, inconvertibility of currency or the inability to repatriate funds.
If you’re ever unsure about your policy wording, get in touch on 01223 324233 and we can help.