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Credit insurance is a risk sharing instrument by the third party which guarantees payment upto90% of the invoice value (generally) if the importer doesnt pay the exporter.
No invoices or shipping documents needs to be presented to the insurer unless and unit the buyer defaults. Payment under a credit insurance policy is based on whether there is compliance with the contract of sale. There is a risk that the buyer will claim that the contract was not complied with, which may involve arbitration / litigation.
Credit insurance is similar to letter of credit in many ways but there are significant differences among these two products. For eg. If LC is used buyers credit is restricted and the importer may not be happy with this always. Entire fees for credit insurance is born by seller generally unlike in the case of an LC.
