Holicent
VIP Contributor
Account receivable insurance protects a business against the possibility of bad debts. It can be purchased through an insurance company, but it is much more cost-effective to purchase through your bank. A policy that provides coverage for bad debts is called an account receivable (AR) policy. It covers the amount owed by customers plus any expenses incurred in collecting these debts, such as legal fees and court costs.
The benefit of purchasing an AR policy is that you don't have to pay out any cash if you don't collect on a customer's debt. If a customer doesn't pay after several attempts, he or she may refuse to pay altogether, or stop paying altogether. In those cases, having an AR policy can help ensure that you receive money from other customers who haven't gone bankrupt or stopped paying their bills. This type of coverage can be used when there is a large amount involved.
The benefit of purchasing an AR policy is that you don't have to pay out any cash if you don't collect on a customer's debt. If a customer doesn't pay after several attempts, he or she may refuse to pay altogether, or stop paying altogether. In those cases, having an AR policy can help ensure that you receive money from other customers who haven't gone bankrupt or stopped paying their bills. This type of coverage can be used when there is a large amount involved.
