Trade Credit Insurance Services
Trade credit insurance, also known as accounts receivable insurance, is a policy that protects businesses against the risk of non-payment by their customers. It provides coverage for losses arising from insolvency, default, or non-payment by customers due to economic or political reasons.
Trade credit insurance is a financial tool that protects businesses from non-payment of commercial debts. It ensures that a business receives payment for goods and services even if their customers default on their payments. This type of insurance helps businesses manage their credit risk and maintain cash flow stability.
Trade credit insurance policies generally cover a percentage (typically 75-90%) of the insured receivables. In the event of non-payment by a customer, the insurer will compensate the policyholder for the covered percentage of the outstanding debt, subject to the policy’s terms and conditions.
Trade credit insurance is beneficial for businesses of all sizes that offer goods and services on credit terms. It is particularly valuable for companies operating in industries with high credit risk or for those dealing with international clients where political risks may be higher.
Trade credit insurance typically covers non-payment due to the customer’s insolvency, bankruptcy, or protracted default. Some policies may also include coverage for political risks, such as war, terrorism, or government actions, if the insured party is an exporter.
Trade credit insurance policies generally exclude pre-existing debts, disputed invoices, credit extended beyond policy limits, late notification of non-payment, fraud or misrepresentation, currency fluctuations, and natural disasters. Additionally, some policies exclude coverage for war between the world’s major powers.
The cost of trade credit insurance varies depending on factors such as the company’s size, industry, credit risk profile, and the desired coverage amount. Premiums are usually calculated as a percentage of the insured company’s annual turnover or the insured receivables.
Two Degrees, a professional insurance consultant, partners with reputable insurers to help businesses find tailored trade credit insurance. We assess your company’s unique risk profile and requirements to recommend the most suitable policy.
Yes, trade credit insurance can cover both domestic and international customers. For international clients, it is crucial to consider purchasing additional political risk insurance to protect your business from risks such as war, terrorism, and government actions.
To file a claim, notify Two Degrees promptly when a customer defaults on their payment or becomes insolvent. Provide the necessary documentation, such as invoices, contracts, and proof of debt, to support your claim. It is essential to adhere to the policy’s notification requirements and timeframes to avoid claim denial.
Yes, trade credit insurance can improve your company’s ability to secure financing from banks and other lending institutions. By reducing the risk associated with your accounts receivable, lenders may be more willing to extend credit to your business at favorable terms.
