What Accounts Does Accounts Receivable Coverage Protect?
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.
How Much Protection Does Accounts Receivable Coverage Provide?
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.
When Does Accounts Receivable Coverage Pay on a Claim?
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:
- A customer fails to pay their bill due to going out of business, filing for bankruptcy or changing ownership
- A customer fails to pay due to economic downturn or seasonal business cycle challenges
- Accounts receivable records are lost due to fire, severe weather, theft or other covered incident
Businesses should carefully review a policy’s terms before purchasing coverage so that they understand what claims that policy will cover.
What Documents Are Needed When Purchasing Accounts Receivable Coverage?
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:
- History of past write-offs and bad debts
- List of all currently outstanding accounts receivables
- List of all accounts receivable customers
- Detailed history of accounts that will be insured
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.
How Much Does Accounts Receivable Coverage Cost?
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.
How Can Massachusetts Businesses Get Accounts Receivable Insurance?
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.
