If a credit limit on a debtor has been set at zero, reduced or set lower by your credit insurer, the credit limit can be topped up with (external) Top-Up cover under certain conditions. This means that this covers your entire claim. The big advantage here is that, in many cases, your bank or factoring company will give you more generous financing. The Top-Up limit is an additional credit limit on top of the primary insurer's basic cover. It can be issued by an external (secondary) insurer up to double the reduced or lower credit limit under certain conditions. Moreover, there are now Top-Up insurers that provide cover on 0-limits and can more than double the limit.
Some examples:
- On a limit application of €1,000,000, your credit insurer issues €400,000 cover. The Top-Up insurer doubles this partial cover by €400,000, bringing the total cover to €800,000.
- On a limit application of €500,000, the insurer issues a cover of €300,000. The Top-Up insurer doubles this partial cover, but the total cannot exceed the requested amount and will therefore be €200,000 making the total cover €500,000.
- On a limit application of €750,000, your credit insurer gives a 0-limit (no cover possible). Traditional Top-Up insurers "double" this 0-limit and thus provide no cover (because 2 x 0 = still 0). So recently, Top-Up insurers have entered the market that can still provide cover on a 0-limit from your insurer under certain conditions and are also willing to provide higher cover than a maximum doubling.
Interesting! But is it necessary?
First of all, Xolv will perform a careful analysis whether the originally requested credit limit can still be set higher. Whereby a temporary limit can possibly be used. If the increase is not possible, you can choose to increase the limit with the existing credit insurer by means of a Top-Up limit. Or you can apply for a Top-Up limit with an external insurer (which requires the primary insurer's approval). Usually, this external Top-Up insurer takes over the terms of the primary credit insurance.
What does that cost?
Of course, you pay a premium to the secondary insurer, as they accept cover that your own insurer does not wish to do. Because you generate more cover this way, you can, again, in many cases get more cover from your bank or receive a larger advance from your factoring company. You may be able to settle the extra costs you incur with your debtor (after all, they also benefit from this, because you now want to do -or do more- insured business).
Want to know more about more coverage on accounts receivable and Top-Up opportunities for your business? Xolv's specialists can give a quick indication!
