What is Trade Credit Insurance?

Credit insurance provides your business with protection against the failure of a customer (‘the buyer’) to pay you for the products/services you have delivered.

This might be because they have become insolvent or have simply failed to pay you within an agreed credit period.

Trade Credit insurance is about much more than financial protection. It can provide access to highly valuable reports about the ‘health’ of the companies you are planning to do business with, sector insight and activity in the marketplace – all of which can enable businesses to implement growth plans with confidence, and be in control of the company’s future direction.

Trade Credit can free up capital which can be used for growth, making it a genuine asset for your business and enabling you to determine the direction your company is going in.

What Does It Do?

Insurers will pay 90% of the debt excluding VAT. A minimum excess will apply which is typically £500. However, if the insurer’s legal team is successful at recovering the amount, they will recover 100% of the debt.

Typically, this policy would be based on ‘whole of turnover’ however, you can opt to insure only the customers identified as posing the greatest potential risk, or choose only to insure the customer whose default would have the greatest impact.

As part of the policy, the credit insurer will monitor each of a business insured customers, assigning them each a credit limit, which is the amount the insurer will protect them if that insured customer fails to pay. A business can also request at any time a credit limit for a new customer that it would like to start trading with.