Insurance of a bad debt when delivering goods or services
The financial product bad debt insurance is available for several areas. As the name suggests, this insurance is used when a debtor fails to pay a creditor’s claims. In the area of credit insurance, also called del credere insurance, the name bad debt insurance is somewhat misleading. Because it is not a matter of insuring a loan, which is possible, for example, when insuring a real estate loan. This is the insurance of a bad debt when delivering goods or services.
Bad debt insurance in the commercial area of credit insurance differs in the forms of commercial credit insurance and capital goods credit insurance. Trade credit insurance secures trade receivables. Capital goods credit insurance covers the economic risks. Political risks can also be hedged with so-called export credit guarantee insurance. In a broader sense, consumer credit insurance belongs to credit insurance. However, creditors are exclusively credit institutions that secure overdraft or installment loans from private customers.
Bad debt insurance covers the damage
The term bad debt insurance can also be found in the area of liability insurance. As a policyholder, you need a legally secured liability claim against a victim. If this is uninsured and does not have sufficient income and private assets to settle liability claims, the bad debt insurance covers the damage. Often, a victim only receives an insurance benefit that is limited in amount and can only be claimed for certain minimum claims amounts.
A surety insurance also covers the loss of claims. It is an inexpensive guarantee for contractual obligations by the insured.
Security insurance is often found in the construction industry. It is recognized as a guarantee both domestically and internationally.
Protection against damage (deliberate acts of the employees) offers companies a fidelity insurance as a special form of credit insurance. The insurance company assumes claims for damages if the debtor cannot afford this.