Massachusetts businesses that are heavily reliant on account receivable could be financially devastated if customers or clients failed to pay. Accounts receivable insurance can help mitigate this risk.
Accounts receivable insurance is a highly specialized commercial insurance for businesses that are financially dependent upon their accounts receivable. Because this is a specialized coverage, businesses should consult an agent who’s familiar with this type of coverage when selecting a policy.
Any Massachusetts business that has accounts receivable can potentially benefit from carrying accounts receivable coverage. In most cases, though, this insurance is purchased by businesses that are heavily dependent upon their receivables. For example, businesses may want the coverage if they:
A knowledgeable agent can help businesses review their particular situation to determine whether this insurance makes sense for them.
When businesses purchase accounts receivable coverage, they usually have the option to choose which accounts will be insured. Most accounts are eligible for insuring, but businesses generally only select the accounts receivables that they’re truly dependent upon. These tend to be a business’ larger client or customer accounts.
In some cases, policies will also automatically include coverage for smaller accounts. When provided, this additional coverage may be limited to on-premises records and have a relatively low limit.
Businesses normally also can choose how well their chosen accounts receivable are insured. Insurance is typically provided in terms of percent due, and a business might choose to insure an account at 100, 80, 60 or some other percent. Since businesses don’t need to receive all of the money due in order to stay financially solvent, many businesses choose to insure accounts an amount that’s less than 100 percent.
Accounts receivable policies generally pay on a covered claim, and a policy’s terms and conditions dictate what constitutes a covered claim. Some situations that a policy might cover are:
Businesses should carefully review a policy’s terms before purchasing coverage so that they understand what claims that policy will cover.
There are several documents that businesses normally must submit when purchasing accounts receivable coverage. Some of the documents that an insurance company is likely to request include:
Even though a business can choose to insure select accounts, a list of all accounts is generally required. This helps an insurer better understand the business’ accounts, and it helps prevent potential fraudulent claims.
Accounts receivable coverage premiums are usually a percent of the total accounts that are insured. For example, a business might pay 1 percent of the insured amount in premiums. The exact percent is dependent upon a business’ industry, accounts receivable payment history, chosen deductibles and other factors.
For help finding accounts receivable insurance in Massachusetts, contact the independent insurance agents at The Feingold Companies. We can help you compare policy options from many insurance companies in the state, and our team has the expertise necessary to help you choose which company has the best policy for your business.