We all know the risks involved with exporting, and while you cannot guarantee against every outcome, you can cover yourself to a certain degree. Export credit insurance is one way of minimising risks when selling to foreign companies, which covers you in the event your invoices do not get paid, and sending a large shipment abroad and not receiving payment could be disastrous for your business.
Political Risk Insurance
There are certain countries in the world where political interference could jeopardise your payment, and while these variables are very much out of your control, you can insure yourself against most outcomes. Like most trade credit insurance, there are terms and conditions, which you need to fully understand before taking out the policy. Here are just some of the scenarios that you can insure yourself against:
- Contract Repudiation – When a customer rejects the goods after they are delivered.
- Non-Payment due to insolvency.
- Cancellation or suspension of import/export licences.
- Government department defaults payment.
There are a number of possible outcomes that political risk insurance would cover, and by discussing your needs with an expert, you can quickly discover whether or not this type of insurance is right for you. Even when the customer wishes to pay the invoice, there are situations whereby they are unable to, due to circumstances beyond their control, which is another reason to take out a special type of insurance.
Non-Letter of Credit Customers
In the event your customer does not wish to use the standard Letter of Credit system and prefers to use an Open Account or Documentary Collection basis, then you really do need some export insurance.
Exporting to Developing Countries
When you export to developing countries, it is very often the case that political instability is involved, and this can seriously threaten your business. A change of government could happen at any time, and theres very little that you can do about that once your consignment of goods has already arrived at the destination. By taking out the right type of insurance, you can be protected in the event of a political upheaval, and the details regarding the situation don’t really matter if you have political risk insurance.
If you would like to know more about export insurance, simply search online and talk to an expert in this field, who can help you find the policy that offers you the protection you need. The specialist insurer can also offer good advice on ways to minimise the risk of non-payment, which helps to protect you in a number of potential scenarios. The specialist insurer would have a wealth of experience in dealing with many different scenarios, and once they understand your situation, they can offer the right type of insurance.