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Trade Credit Insurance

Trade Credit Insurance protects businesses against the risk of non-payment by their customers, ensuring that the company's cash flow and balance sheet are safeguarded against defaults. This type of insurance is particularly valuable for companies that offer credit terms to their customers, as it ...

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Trade Credit Insurance protects businesses against the risk of non-payment by their customers, ensuring that the company's cash flow and balance sheet are safeguarded against defaults. This type of insurance is particularly valuable for companies that offer credit terms to their customers, as it ... mitigates the risk of financial loss from unpaid invoices due to insolvency, protracted default, or political risks in cross-border trade.

What is Typically Covered:

  • Commercial RisksProtection against customer insolvency or prolonged default in payment.
  • Political RisksCoverage for losses arising from political events that prevent payment, such as currency inconvertibility, ... government actions, or war in the buyer's country.
  • Product RisksCoverage for the non-payment of goods and services delivered as per contract terms.
  • Buyer InsolvencyCompensation for losses if a buyer becomes insolvent and is unable to pay for goods or services provided.

What is Not Typically Covered:

  • Disputed DebtsDebts that are not paid due to disputes over the goods or services provided are typically not covered unless the dispute is resolved in favour of the insured.
  • Credit Sales to Associated CompaniesSales made to subsidiaries or associated companies are often excluded.
  • Pre-Delivery RisksRisks associated with the period before goods are delivered to the buyer, such as pre-shipment risks, are usually not covered.
  • Known RisksIf the buyer was known to be in financial difficulty at the time the policy was taken out, any resulting losses may not be covered.

Frequently Asked Questions

What types of businesses can benefit from Trade Credit Insurance?

Any business that sells goods or services on credit terms can benefit from Trade Credit Insurance, including exporters, manufacturers, wholesalers, and service providers.

How does Trade Credit Insurance work?

Trade Credit Insurance provides coverage for a portfolio of buyers or a single transaction. The insurer will assess the creditworthiness of your customers and set credit limits, which is the maximum amount you will be insured for if that customer fails to pay.

Can Trade Credit Insurance cover international sales?

Yes, Trade Credit Insurance can cover both domestic and international sales, providing protection against non-payment risks in different markets.

What happens if a customer doesn’t pay?

If a customer covered by your Trade Credit Insurance policy fails to pay within the terms of the policy, you can file a claim with your insurer. The insurer will then compensate you for the insured percentage of the outstanding debt.

How is the premium for Trade Credit Insurance calculated?

Premiums are typically based on a percentage of your turnover, the creditworthiness of your customers, the level of risk in the countries where you trade, and your previous credit management experience.

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