Credit insurance policies typically cover a percentage of the invoice value, which can range from 75% to 95%. In the event of a customer default, the insurance company compensates the insured business for the covered amount. The process usually involves:
Policy Purchase: The entrepreneur purchases a credit insurance policy from an insurance provider. Credit Assessment: The insurer assesses the creditworthiness of the entrepreneur's customers. Coverage Agreement: The insurer and the entrepreneur agree on the coverage terms, including the percentage of invoice value covered. Claim Filing: If a customer defaults, the entrepreneur files a claim with the insurer, who then compensates the agreed-upon amount.