Trade Credit Insurance
Trade Credit Insurance
Trade Credit Insurance protects businesses against the financial impact of customers failing to pay for goods or services they have purchased on credit.
Depending on the policy, cover can protect against customer insolvency, protracted payment defaults and certain political risks affecting overseas customers.
For businesses that regularly offer credit terms to customers, a significant unpaid invoice can have a direct impact on cash flow and profitability. Trade Credit Insurance can help reduce this risk by reimbursing an agreed proportion of an insured debt when a qualifying customer fails to pay.
At Konsileo, our specialist insurance brokers help businesses assess their exposure to customer non-payment and arrange Trade Credit Insurance tailored to their customers, sectors, territories and trading arrangements.
How does Trade Credit Insurance work
Trade Credit Insurance typically works by protecting a business’s outstanding customer invoices against specified risks of non-payment.
Your business supplies goods or services on credit
You provide goods or services to customers and allow them to pay according to agreed payment terms.
Customer credit risk is assessed
The insurer assesses the financial strength and creditworthiness of your customers and may establish credit limits for individual buyers.
You continue trading
Once appropriate cover is in place, you can continue offering customers credit while managing the risk of significant unpaid invoices.
A customer fails to pay
If an insured customer becomes insolvent or fails to pay within the circumstances and timescales covered by the policy, you can notify the insurer and follow the claims process.
The insurer settles an eligible claim
Where the claim is covered, the insurer can indemnify an agreed percentage of the insured loss, subject to the policy terms, conditions, exclusions and applicable credit limits.
What does Trade Credit Insurance cover?
Depending on the policy, Trade Credit Insurance may provide protection against:
- Customer insolvency
- Protracted default or non-payment
- Unpaid invoices arising from specified commercial risks
- Certain political risks affecting overseas customers
- Government intervention or restrictions in some territories
- Political violence in some circumstances
- Transfer and currency-conversion risks, where included within the policy
- Trade Credit can be applied to all business sectors – Motor Trade, Manufacturing, Retail etc.
The exact risks covered vary between insurers and policies, so businesses should review the policy wording, exclusions, credit limits and conditions before relying on cover.
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Who can benefit from Trade Credit Insurance?
Trade Credit Insurance can be particularly relevant to businesses that:
- Sell goods or services on credit
- Have a small number of customers representing a significant proportion of turnover
- Offer customers 30, 60 or 90-day payment terms
- Have substantial outstanding trade receivables
- Supply customers overseas
- Operate in sectors where customer insolvency could create significant losses
- Are experiencing rapid growth and therefore increasing their exposure to customer debt
Why Choose Konsileo for your Trade Credit Insurance?
The level of cover varies for each business and includes considerations for location, size, sector, profitability, and past claims history. It is imperative you take out the correct cover. If it is not done properly, you could be faced with a hefty financial loss.
Here at Konsileo, our team have a wealth of specialist experience, dealing with a multitude of businesses in a wide range of sectors. Their combined market and policy knowledge provides them with the expertise required to advise and tailor Trade Credit Insurance to your unique needs. Contact one of our specialist trade credit brokers today to protect your business, properly.
Frequently Asked Questions
Trade credit insurance does not cover every type of financial loss. Common exclusions may include:
- Sales made above an approved credit limit.
- Disputed invoices where goods or services are challenged.
- Cash sales or payments made in advance.
- Fraud committed by your own business.
- Transactions that fall outside the policy terms.
Your broker can help explain any exclusions and ensure your business remains fully protected.
The cost of trade credit insurance depends on several factors, including your annual turnover, industry sector, number of customers, countries you trade with, claims history, and the level of cover required.
Premiums are generally calculated as a small percentage of insured turnover. For many businesses, the cost is outweighed by the financial protection, improved cash flow, and confidence to grow sales safely.
Yes. If your business relies heavily on a single customer or a small number of key accounts, Single Buyer Trade Credit Insurance may be the ideal solution.
This type of policy protects your business against non-payment from one specific customer, providing valuable protection where losing a major account could have a significant financial impact.
Yes. Banks and finance providers often regard insured debts as lower risk, making it easier for businesses to access funding facilities such as invoice finance, factoring, asset-based lending and working capital finance.
Trade credit insurance can strengthen your balance sheet and provide lenders with additional confidence.
Protracted default occurs when a customer fails to pay an undisputed invoice within the period specified in your policy, even though they have not become insolvent.
Most trade credit insurance policies provide cover for protracted default, ensuring businesses are protected against customers who simply fail to pay despite repeated collection efforts.
In most cases, trade credit insurance premiums are treated as a legitimate business expense and may be tax deductible. However, tax treatment depends on your individual circumstances and current tax legislation.
You should always seek advice from your accountant or tax adviser regarding your specific business.