What Is Trade Credit Insurance And How Does It Work?

28 January 2021 – Trade credit insurance protects your business from bad debts. It insures your accounts receivable and protects your business from unpaid invoices caused by customer bankruptcy, default, political risks, or other reasons agreed with your insurer. It’s also known as debtor insurance, export credit insurance and accounts receivable insurance.

How Does Trade Credit Insurance Work?

No matter how careful you are, your customers can sometimes fail to pay. Unless you demand payment up front or are covered by credit insurance, this makes you vulnerable to bad debt. Can your business afford a bad debt?  Credit insurance protects your cash flow. It covers your trade with your customers, so that you still get paid even if they go under or fail to pay you.

Trade credit insurance works by insuring you against your buyer failing to pay, so every invoice with that customer is covered for the insurance year. It’s used by businesses of all sizes to protect both international and domestic trade. Businesses also use credit insurance to help them secure finance and working capital with banks, explore new markets with confidence and attract new customers with favourable credit terms.

As with all types of insurance, there is no one size fits all approach. The level and cost of your credit insurance will be dictated by your needs. For example, the size of your credit portfolio, level of risk associated with your customers and location of your market will be unique to your business. Most trade credit insurance solutions will therefore be tailored to your requirements. Trade credit insurance FAQs: https://prestigecredit.co.za/faq/ Source (Atradius)