Trade Credit Insurance Fundamentals

Trade Credit Insurance Fundamentals#

Trade credit insurance covers commercial risk (buyer insolvency, protracted default) and political risk (currency inconvertibility, import restrictions, war). Coverage: typically 85-95% of invoice value. Premium: 0.1-0.5% of insured turnover depending on buyer country, sector, and payment terms. On $10M receivables, annual premium is $10-50K — cheap insurance against a $500K bad debt.

Choosing Between Whole Turnover and Single Buyer Policies#

Whole turnover policies cover all buyers (or all export buyers) under one policy — simpler administration, typically lower premium per dollar insured. Single buyer policies cover specific high-risk accounts — more targeted, higher per-buyer premium. Decision: if you have 50+ active accounts, whole turnover is more cost-effective. For 5-10 key accounts, single buyer policies give you more control over coverage levels.

Making Claims and Maximizing Recovery#

When a buyer defaults: file claim within 30-60 days of due date (per policy terms), provide: original contract, invoices, delivery proof, correspondence showing collection attempts, and buyer financial information. Insurer investigates and pays within 30-180 days. Your obligations: maintain credit limits approved by insurer, report overdue invoices promptly, and get insurer approval before extending new credit to slow-paying buyers.

• Trade credit insurance protects against buyer non-payment — cover 85-95% of receivables for 0.1-0.5% of insured turnover