Frequently Asked Questions: Trade Credit Insurance

3 Feb

Trade Credit Insurance is a service that monitors creditors and protects businesses. It offers a cost-effective and simple way of insuring against the risk of not getting paid by your customers.

In addition to safeguarding your business against bad debts, Trade Credit Insurance can also play a role in supporting growth. Guaranteed income may be vital to building a business and insurance can be useful when entering new markets. Trade Credit Insurance offers market and company analysis alongside financial products and can tailor policies to currencies and languages.

In an earlier article, we discussed why you should consider Trade Credit Insurance for your business. Below, we share our most commonly asked questions to delve deeper into how Trade Credit Insurance works.

What kind of business is Trade Credit Insurance designed for?

The simple answer is all businesses who extend credit to customers. For many companies, Trade Credit Insurance is just about protecting their bottom line. However, some companies specifically take out Trade Credit Insurance to improve their cashflow by boosting their credit standing. We can provide solutions for either.

How can I assess the value of Trade Credit Insurance?

Many businesses consider the serious consequences of how a large bad debt or several smaller ones could impact its financial stability. With continued economic uncertainty and rising insolvencies, more companies are likely to experience bad debt. A Trade Credit Insurance policy can provide certainty in an uncertain world.

Is Trade Credit Insurance really a ‘rock-solid’ guarantee?

Absolutely. With Trade Credit Insurance in place, your invoices are protected up to the value you insure. You might go for the full available invoice cover or opt for lower cover options that cost less, but still provide protection. Either way, if the insurer agrees on your credit limit and you comply with the policy terms, you are covered for the agreed amount.

Do I need a broker?

The benefit of using us is that we have access to all insurers in the marketplace, including those who don’t deal with businesses directly. As a broker, we are normally able to negotiate better terms. Our expertise in this field becomes your expertise when it comes to getting the best from your policy. It ensures you will always have the right policy in place to meet the exact needs of your business.

Do I have to cover my entire ledger?

Trade Credit Insurance is as flexible as you need it to be. Insuring your whole turnover gives you the ultimate protection, but you may simply want to insure the customer that presents the greatest credit risk. That’s where our expertise comes in. We will go through your ledger with you and take you through a complete risk evaluation, so that you can make an informed choice.

How is the cost of Trade Credit Insurance calculated?

Each insurer has their own terms. Cost can also vary depending on the associated risk factor for that sector or a particular customer. If you have had previous losses, these will also be taken into account. As with any insurance policy, premiums can vary from year to year – which is another good reason to have a broker in place. The cost is generally calculated as a percentage of the sales you want to cover. It’s our job to get you the best price.

Will underwriters only cover my good risks?

It has always been perceived that underwriters only look to cover ‘good risks’. This really isn’t the case as all credit limits, whether large or small, will be subject to the same process. Limits are based on the company rating, account history, payment trends and turnover. If a business is struggling then of course an underwriter will be more cautious, but they will always look to write as much cover as they possibly can. One way to increase the cover available is by introducing a discretionary limit. This means that the client is in charge of setting their own credit limits.

Should I be worried about my credit limits being taken away?

Underwriters will now include a delayed effect clause to all policies, meaning that they cannot take away a credit limit immediately and have to give the client at least 30 days’ notice. We have also seen a large increase in non-cancellable credit limit policies.

What are your fees?

It doesn’t cost you anything for our services as we are paid directly by the insurer. We’d be happy to provide more details on request.

I already have cover in place, can I move to another provider?

Of course. We’d be happy to talk through your needs and assess any shortfall in your current policy cover.

Have Any Further Questions About Trade Credit Insurance?

For more information about Trade Credit Insurance, please contact our Head of Credit & Surety, Rob Farquharson on 02920 858605 or at