What is Trade Credit Insurance?
Trade Credit insurance protects your business from bad debts
No matter how careful you are, your customers can sometimes fail to pay. Unless you demand payment up front or are covered by trade credit insurance, this makes you vulnerable to bad debt. Credit insurance protects your cashflow, so that you still get paid even if your business has unpaid invoices caused by customer bankruptcy, default, political risks, or other reasons agreed with your insurer.
Who should consider it?
All businesses that sell goods and services on credit terms, such as 30 days to pay, should consider trade credit insurance. This includes businesses that trade domestically and internationally.
Some trade credit insurance policies also offer the bonus of working with designated collection agencies to help you recover your debts – taking the pressure off this difficult and time-consuming process.
In addition to protecting your business from the risk of insolvency, Trade Credit insurance can help:
- Grow your customer base as potential buyers may be attracted to your credit terms
- Enhance trade providing you with the confidence to develop and expand your market
- Guarantee cashflow enabling you to build strong relationships with your suppliers and employees
- Safeguard customer relationships through improved communication and enhanced credit terms
- Improve your access to finance and your relationship with your bank
- Meet the risk management requirements of your stakeholders or board and provide peace of mind
What can it cover:
Depending on the policy, trade credit insurance can be either:
- Comprehensive cover: Protecting your entire credit portfolio, including domestic and export customers
- Excess of loss: Suitable for businesses with strong internal credit management processes who want cover for exceptional loss across their entire portfolio
What isn’t covered:
Cover will need to be agreed with underwriters and exclusions will apply. You should review any quote received carefully and consider the policy wording for all policy terms, conditions, exclusions and limitations.