You must be familiar with the word insurance. General insurance, usually known by the public, is health, education, old age, and accident insurance. However, did you know that other types of general insurance are rarely known?
General insurance that is not widely known to the public is credit insurance and guarantees. What is mean by credit and warranties insurance? Check out the explanation below!
What are Credit Insurance and Underwriting?
Credit insurance provides coverage to creditors for the risk of loss due to bad credit. It means the insurance company will protect financial institutions if the debtor fails to repay the loan.
That is not much different from the definition of warranties insurance. However, more broadly, it will protect against risks due to failure or default (breach of promise) to carry out the contract according to the agreement between the parties.
Who is This Credit Insurance and Guarantee Intended For?
Credit insurance is for banks or financial institutions that can provide credit to individuals or companies. While the guarantee insurance is for project owners, also called obligees, who have a contractual relationship with the contractor or Principal.
In providing credit or carrying out a contract agreement, one of the parties may fail to fulfill its obligations. For example, if you apply for credit at bank X but cannot pay off the debt. Well, this is where you can utilize the role of credit insurance.
Credit Insurance and Guarantee from Tugu Insurance will protect financial institutions and the Obligee from the agreement’s failure. This protection guarantees that the Insured does not feel more disadvantaged for the costs incurred due to failure to fulfill the deal.
4 Types of Credit Insurance and Guarantees from Tugu Insurance
Tugu Insurance offers four types of credit insurance and guarantees that you can choose according to your needs, includes:
- Credit
Credit insurance at Tugu Insurance consists of two options, one of which is financing credit insurance. Tugu Insurance will protect the Insured by the provisions of the policy. Protection is provided based on the risk of failure of the Insured as the debtor. The second option is trade credit insurance. This insurance is intended for entrepreneurs to keep their businesses running smoothly.
- Suretyship
This insurance is a written agreement between Surety (insurance) and the Principal to provide guarantees to the Obligee. The deal guarantees that the Principal will fulfill the obligations per the contract with the Obligee. Tugu Insurance itself has several suretyship insurance products, namely:
- Tender guarantee insurance, intended as a guarantee to the Obligee in resignation event from the Principal or refusing to sign a contract with the Obligee after winning the project.
- Performance guarantee insurance is given to the Principal to complete the work according to the standard and time agreed in the employment contract.
- Advance payment insurance, in the form of a guarantee for the return of the advance received by the Principal.
- Maintenance guarantee insurance is a guarantee for the Principal’s obligations given to the Obligee during maintenance.
- Cons of Bank Guarantee
This product is a proof of guarantee from Surety for a Bank Guarantee issued by a Commercial Bank for the Principal’s benefit by the provisions of the Obligee. Surety parties are bound by an agreement to pay compensation to the bank for claims submitted by the Obligee. The types of counter-bank guarantee products provided by Tugu Insurance are Tender Guarantee, Performance Guarantee, Advance Guarantee, and Maintenance Guarantee.
- Payment Bond
This insurance product will ensure that Surety pays the highest amount to the Obligee through the guarantee certificate’s agreement. It occurs when the Principal fails to pay based on the payment terms written in the contract between them and the Obligee.
This product offered by Tugu Insurance has a period that it can adjust according to the duration of the contract. In addition, Payment Bond products are also issued in US Dollar foreign currency. This product suits companies engaged in the procurement, project work, and service providers.
That explains one of the lesser-known general insurances, Credit Insurance, and guarantees from Tugu Insurance. Protect your project with insurance products from Tugu Insurance. For more information about other insurance products from Tugu Insurance, you can visit the official website and Instagram @tuguinsurance.