An advance is a payment that the company is required to transfer to one of its suppliers upon ordering a product from the supplier, as part of the transaction’s payment terms, even though the product purchased will be delivered at a later date (weeks or even months later). The purchased product can be raw material for the manufacturing process, manufacturing equipment, or finished goods for marketing.
During the period between the transfer of the advance to the supplier and the delivery of the product, the company that ordered the product is exposed to a risk that the product will not be delivered, despite the payment of the advance, in these cases the sum of the advance payment becomes a loss.
ICIC’s advance payment insurance protects the policyholder who paid the advance from the following events:
Advance payment insurance completes the insurance coverage continuity in keeping with the risk exposure at every stage of a transaction: from insuring the payment of the advance to the supplier, through manufacturing cost insurance (before shipment), to insuring the credit granted to the company’s clients.