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Trade Credit Insurance
Provide help you get the best Trade Credit Insurance to protect your business against non-payment for goods sold or services rendered.
Trade Credit Insurance protects your receivables against non-payment by customers, which improves your cash flow, and helps you sell more on credit.
This type of insurance pays for:
1. Defaulted payments by customers for goods or services you provided
2. Debt collection services
Have you ever had customer defaults affect your company’s cash flow? Have you wished you could sell to more customers, without worrying about credit risk? If you want to strengthen your cash flow, boost sales, and stop worrying about customer non-payments, then Trade Credit Insurance is perfect for your business.
Trade Credit Insurance insures you against non-payment for goods you sell or services you provide. The buyer may be located in the same country as you (domestic risk) or another country (export risk).
1) Commercial Risk: non-payment due to (i) insolvency of your buyer, or (ii) non-payment after a specific time period (usually 6 months after invoice due date, but varies depending on the insurer)
2) Political Risk: non-payment following a government’s action outside the control of your buyer or yourself. For example, if money cannot be transferred from your buyer’s country to your country, this policy will cover you.
Credit insurance can include a wide range of tailored coverage such as pre-shipment risks. You should consult an experienced broker like us to customise a plan for your company.
There are many applications for the use of Trade Credit Insurance today. Businesses can use it to:
Increase sales by selling more on open terms
Guarantee strong cash flow and protect the balance sheet
Apply for new financing options e.g. trade receivables financing
Obtain expert research on obligor, industry, and country risks
Strengthen credit management
The amount & type of coverage to buy depends on:
- How much of your receivables you want to insure
- Your outlook on your buyers’ ability to pay
- How generous you are with payment terms
There are several types of this insurance:
A Whole Turnover Policy will cover all your receivable sales. This is the most common type of Trade Credit Insurance. It’s useful because it grants you blanket coverage and you don’t have to worry about which buyer may or may not default.
A Key Accounts Policy will cover selected buyers only. This is useful if you have a few big accounts (you’d have serious cash flow issues if they didn’t pay), or you are selling to new buyers (you don’t know their credit risk).
A Single Buyer Policy will cover one buyer. This is useful if you are selling to a new buyer (you don’t know their reliability), or have poor experience/expectations of payment from a specific company.
A Transactional policy will cover one receivable transaction. This is useful if you usually sell on cash terms, but are now making a big sale on credit (and you want to ensure you get paid.)
Trade Credit Insurance can be pretty complex. It’s best to speak with an experienced broker who can craft a custom plan for you. Speak with our industry experts today!
The annual premium is usually between 0.8-3.0% of the insured turnover amount. The exact percentage depends on your company and buyer riskiness. There is also a minimum premium amount that will vary with each business.
Some of the variables influencing the premium rates include:
Industry
Insurable turnover
Creditworthiness of customers
Customer location (domestic v.s. international)
Terms of payment/payment period
Loss history (for past 3 years)
Corporate credit management
Policy structure & special clauses
