Benefits of Trade Credit Insurance

Trade credit insurance provides businesses with protection against customers who fail to pay what they owe.

Is one of your largest assets unprotected? Accounts receivable are often a business’s biggest asset. If your customers are unable to pay what they owe, potential credit losses can present a substantial threat to your business. Trade credit insurance—also known as credit insurance or export credit insurance—is a form of insurance that transfers risk from businesses seeking to protect their accounts receivable against non-payment.

Trade Credit Insurance Coverage

Let’s take a closer look at what credit insurance coverage offers to see how it could benefit your business.

Businesses purchase credit insurance for:

Improved sales

Businesses with credit insurance can boost their sales to new and existing customers. They can do this by offering customers and prospects more favourable credit terms. This can also eliminate the need for costly letters of credit.

Access to new markets

Trade credit insurers offer protection against unique export risks. They do this by providing businesses with the market knowledge needed to make informed decisions in foreign markets.

Insolvency protection

In regards to sales made on credit terms, credit insurance protects organizations from the risk of a customer default or insolvency. It insures against a buyer that has declared bankruptcy, insolvency or a similar legal status, as well as protecting insureds against buyers who delay payments under a bankruptcy protection arrangement.

Cash flow relief

Trade credit insurance provides cash flow relief when a business’s customers become insolvent or do not pay their bills on time. Losses can be indemnified, allowing the business to maintain its cash flow.

Reduce concentration risk

Trade credit insurance mitigates risks for businesses whose bottom line is dependent on a select number of customers. It also provides valuable credit information on unknown buyers.

Accounts receivable support

Trade credit insurers offer businesses access to professional trade credit analysts who can share best practices with a company’s credit department. They can aid in measuring the creditworthiness of a business.

Collection services

Insurance providers often provide access to discounted debt collection services, if a business finds itself in need of them.

Facilitate bank financing

Banks will typically offer more favourable lending terms to businesses that insure their accounts receivable. With credit insurance, you may be able to borrow more, at more favourable rates.

Portfolio monitoring

Trade credit insurance also provides access to professional portfolio monitors who track customers and their ability to pay.

Trade credit insurance is an important component of comprehensive coverage, especially for any business that sells services or products on credit. When looking for a trade credit insurance policy that meets your financial needs and goals, look for an insurance broker who works with your business interests in mind.