Misconceptions about credit insurance explained

Credit insurance is a powerful tool for protecting your business against the risk of non-payment, but it’s also widely misunderstood. From assumptions about cost and complexity to confusion over what it actually covers, many companies overlook its strategic value due to persistent myths.

In this article, we address the most common misconceptions and explain what credit insurance really offers: not just financial protection, but insight, confidence and support for sustainable growth.

1. Credit insurance is only for large businesses

It’s a common assumption that credit insurance is designed exclusively for multinational companies with high turnover and complex international operations. But this couldn’t be further from the truth.

Fact: Small and medium-sized enterprises (SMEs) are often more exposed to the impact of non-payment. A single unpaid invoice can significantly disrupt their cash flow, especially if they lack financial buffers. Credit insurance helps protect these businesses from unexpected losses and gives them the confidence to grow safely.

We work with companies of all sizes. Our solutions are scalable and tailored to the needs of each business, whether you're a local supplier or an ambitious exporter.

2. Credit insurance is too expensive to be worthwhile

Many businesses assume that credit insurance is a luxury, an added cost that only large companies can afford. But this perception often overlooks the real financial impact of non-payment.

Fact: The cost of credit insurance is typically a small percentage of your turnover. In return, you gain protection against bad debt, access to buyer risk assessments, and support with collections. More importantly, you safeguard your cash flow and reduce uncertainty, especially when entering new markets or working with unfamiliar customers. 

Credit insurance as an investment in business continuity. For many companies, the value lies not just in the coverage, but in the confidence it brings to their commercial decisions.

3. I only need credit insurance for new customers

Many businesses believe that long-standing relationships and personal trust are enough to protect them from non-payment. “Credit insurance is unnecessary if you know your customers well. We’ve worked with them for years, they always pay.” But even the most reliable customers can face unexpected financial difficulties.

Fact: Knowing your customers is important, but it doesn’t eliminate risk. Market disruptions, liquidity issues, or geopolitical events can affect even the most stable companies. Credit insurance adds an extra layer of protection and provides access to independent, up-to-date information about your buyers’ financial health, often beyond what you can see yourself.

Credit Insurance helps businesses make informed decisions, not just based on history or trust, but on real-time data and expert risk assessments.

4. Credit insurance is only relevant for export markets

Many companies associate credit insurance with international trade, assuming it’s only necessary when dealing with unfamiliar buyers abroad. But payment risks exist just as much in domestic markets.

Fact: Credit insurance applies to both local and international transactions. Whether you’re selling across borders or within your own country, the risk of customer insolvency, delayed payments or sudden financial distress is real.

Credit insurance supports businesses in managing risk wherever they operate. Our coverage and insights help you trade with confidence, at home and abroad.

5. Credit insurance is only useful in times of economic crisis

It’s easy to think of credit insurance as something you only need during recessions or periods of financial instability. When markets are volatile and insolvencies rise, the value of protection becomes obvious. But credit risk doesn’t disappear in stable times.

Fact: Credit insurance is just as relevant during periods of growth. It enables businesses to expand confidently, enter new markets, and take on new customers with greater certainty. Even in strong economic conditions, individual companies can face sudden liquidity issues, sector-specific downturns or geopolitical shocks.

What’s more, entering credit insurance during the favourable part of the economic cycle is often more cost-effective. Premium rates tend to reflect the current level of risk in the market, meaning coverage is typically more affordable when conditions are stable.

We see credit insurance as a strategic tool that helps businesses manage risk proactively, regardless of the economic cycle.

6. Credit insurance is too complicated or time-consuming

Credit insurance is sometimes seen as complex, bureaucratic, or difficult to manage, especially by businesses unfamiliar with it. This perception can discourage companies from exploring its benefits.

Fact: Modern credit insurance is designed to be straightforward and efficient. Digital platforms allow businesses to request credit limits, monitor buyer risk, and manage claims with ease.

We offer intuitive tools and dedicated support to ensure the process is clear and practical. Our goal is to make credit insurance accessible, not just in terms of coverage, but also in how it integrates into your day-to-day operations.

7. Credit insurance is just a way to claim unpaid debts

Some businesses view credit insurance as a reactive tool, something you turn to only after a customer fails to pay. But this overlooks its broader strategic value.

Fact: Yes, the real strength of credit insurance lies in its guarantee that if a covered buyer fails to pay, the insurer will compensate the loss. But credit insurance is first and foremost a preventive solution. It helps you assess buyer risk before a sale is made, monitor changes in customer behaviour, and make informed decisions about credit limits. 

We combine insurance with proactive risk management. Our aim is not merely to help you deal with bad debts, but to prevent them from arising in the first place.

8. Credit insurance replaces the need for credit management

Some companies believe that once they have credit insurance, they no longer need to invest in internal credit control. The assumption is that the insurer will take care of everything related to buyer risk and payment behaviour.

Fact: Credit insurance is a powerful complement to your credit management, not a replacement. Strong internal processes remain essential for assessing customer reliability, setting payment terms, and following up on outstanding invoices. Credit insurance adds an extra layer of protection and insight, but it works best when integrated with disciplined credit practices.

We encourage businesses to see credit insurance as part of a broader risk strategy, one that combines internal expertise with external support.

9. Credit insurance covers all risks

It’s sometimes assumed that once a credit insurance policy is in place, every unpaid invoice is automatically covered. While this perception is understandable, it doesn’t reflect how credit insurance works, and why it’s so valuable.

Fact: The core strength of credit insurance lies in its active risk monitoring. Policyholders request coverage for specific commercial credit lines, and insurers assess and approve those limits based on up-to-date risk information. These limits can be adjusted as buyer circumstances evolve.

Generally, any invoice that falls within an approved credit limit is covered, so the insured knows at all times whether they’re trading under the protection of the insurer. 

10. Credit insurance only covers non-payment

It’s often assumed that credit insurance is limited to compensating for unpaid invoices. While protection against non-payment is a key feature, it’s far from the whole picture.

Fact: Credit insurance combines financial protection with proactive risk management. It gives you access to buyer risk assessments, country and sector insights, ongoing monitoring of customer behaviour, and support with collections. 

Credit insurance is a strategic tool that supports your business before, during and after a transaction. It helps you make better decisions, avoid losses, and grow with confidence. 

Benefits of Credit Insurance

If we turn these ten myths about credit insurance on their head, we get a clear picture of its real capabilities. Credit insurance is a powerful tool for businesses of all sizes, not just large corporations. Far from being an unnecessary expense, it offers cost-effective protection that secures cash flow and supports growth. It’s relevant for every customer relationship—new or established—and applies equally to domestic and international trade. Credit insurance is not limited to times of crisis; it provides confidence and stability in any economic climate. Modern solutions are simple to manage and integrate seamlessly with credit processes, making them efficient rather than burdensome. More than a way to recover unpaid debts, credit insurance is a proactive risk management tool that complements, rather than replaces, your credit management strategy. While it doesn’t cover every conceivable risk, it offers robust protection against the most critical threat: non-payment, and includes added services such as credit assessment and monitoring. In short, credit insurance delivers security, insight, and peace of mind, helping businesses trade boldly and grow sustainably. We’re here to support that journey with insight, ability and tailored solutions.

To explore how to strengthen your own credit risk strategy, get in touch with us and see how we can help you stay ahead.