In many cases the policyholder is exposed to risks of client insolvency or political events in his country during the product manufacturing period – even before the dispatching of the shipment covered by the credit insurance.
This exposure exists from the moment the client places an order and the manufacturing process begins, until the shipment stage. The manufacturer can suffer damage due to the investment he made in the costs of manufacturing the orders. This damage is not covered under regular credit insurance, which starts with the shipment of the goods and the creation of a financial debt on the part of the client.
In cases when the product is standard and can be marketed without modification for other clients, the damage is relatively limited, but if the order is one-of-a-kind or the product would have to be altered for other clients – the damage could amount to most of the manufacturing costs and be considerable. The longer the manufacturing process, the greater the risk is.
Manufacturing cost insurance is therefore a complementary product to credit insurance and creates continuous protection for the policyholder, from the moment the order is placed until payment is received from the client.
The insurance coverage in this type of policy relates to the investment made by the policyholder for an order’s manufacturing costs, less the policyholder’s deductible, which is 10% for foreign transactions and 15% for transactions in Israel.
This type of policy covers the following events:
Manufacturing cost insurance from the ordering stage also provides protection when payment terms are CAD or via letter of credit. The insurance protection in such cases covers the period until the payment or the opening of the letter of credit in the policyholder’s favor.