Here’s a breakdown of how claim payouts are typically calculated in credit insurance policies:
- Covered Loss:
- The starting point is the outstanding amount of the unpaid invoice (or invoices) relating to the insured event (insolvency, protracted default, etc.).
- Deductible:
- Your deductible is subtracted from the covered loss. You are responsible for covering this initial portion of the loss.
- Coinsurance:
- Your coinsurance percentage is applied to the remaining amount. This determines the portion of the loss you share with the insurer.
- Example: With a 10% coinsurance, you would be responsible for 10% of the loss amount after the deductible. The insurer would cover the remaining 90%.
- Coverage Limits:
- Payout is capped by any applicable limits:
- Overall Policy Limit: The maximum the insurer will pay across all claims during the policy period.
- Buyer Limit: The maximum coverage for a specific customer.
Example Calculation:
- Invoice Amount: $50,000
- Deductible: $5,000
- Coinsurance: 10%
- Covered Loss after Deductible: $50,000 – $5,000 = $45,000
- Your Share (Coinsurance): $45,000 * 0.10 = $4,500
- Insurer’s Payout: $45,000 – $4,500 = $40,500
Important Notes:
- Policy Wording: Always refer to your policy’s specific terms for calculating claim payouts, as there may be nuances.
- Maximum Coverage: Even with coinsurance, insurers typically have a maximum dollar amount they will pay out on a single claim.
- Partial Payments: In some cases, you might receive a partial payout if the buyer makes some payment towards the debt after you file a claim.