This is a great benefit. The most uncertainty you have is tendering on a new job for a client you know nothing about. If it’s for a lot of money then you would be right to be a bit suspect. How do you know they have the capacity to pay for your work?
NCI can carry out credit checks on all your potential clients before you quote for the job. This way you can reduce the risk profile of your business and choose not to quote for some jobs. Again it all comes down to access to great quality information.
What does it cost?
This is perhaps the biggest surprise of all; this kind of insurance is pretty accessible: Most of the time it comes in about 0.5%-0.8% of your annual turnover. That’s right…less than 1 %. And even then you can pay that in monthly instalments.
Work that one out now in your head…. it’s not a huge price to pay for avoiding a major loss when a client goes under. Could you keep going if your client went down owing you $50 000?
Like many insurance products you need to adopt an excess. Let’s say you nominate $5 000 or $10 000. So if one of your clients does go under, you lose that amount. But the rest is insured to a value of 80% to 90%.
Let’s look at some real life examples:
A contractor was involved in a large project for a big builder. The contractor had an annual turnover of $7 million and was owed about $250 000 by the builder. The contractor had a policy in place covering the high risk clients, and the contractor had an excess of $10 000.
The builder went into administration.
The policy paid out like this: $250 000 loss (excluding GST) – $10 000 excess = $240 000
Loss is paid out at 85% of its face value = $204 000
Yeah that’s right. The contractor gets a cheque for $204 000! That beats waiting around for creditors meetings and waiting for your 0.01 cents in.