Trade Insurance

The insurance that protects manufacturers, traders and service providers against losses from non-payment of a commercial trade debt is known as trade credit insurance. If a buyer does not pay the amount or pays late, the trade credit insurance policy will pay out a percentage of the outstanding debt. The percentage usually ranges from 75% to 95% of the invoice amount, but may be higher or lower depending on the type of cover that was purchased. It has been specially formulated to protect the policyholder’s business against risks which are beyond their control. This is an insurance for short term account, due within 12 months.

Trade credit insurance can prevent bankruptcies, help companies manage credit and even present opportunities for business expansion. These trade credit insurance policies are flexible and allow the policyholder to cover the entire portfolio or just the key accounts against bad debts, corporate insolvency and bankruptcy. Whole turnover cover is the most common type of cover which covers all buyers of the policyholder. If direct link does not exist, outstanding debts cannot be covered by a trade credit insurance policy.

The process to settle your trade insurance claim is quick and hassle-free. It must be ensured that all the essential documents are properly provided valid and duly filled/stamped).

Trade Credit Insurance covers:

This insurance provides coverage against political and commercial risks for your business. It helps companies attain goals by turning over their sales into cash.

  • Open accounts sales-international and domestic exports are protected by trade insurance against non-payment from the purchaser. This can be caused due to buyer insolvency that is if the buyer declares bankruptcy of business and if the buyer doesn’t declare bankruptcy and is unable to pay (protracted default) because of political risk like inconvertibility of currency.
  • Covers the complete turnover with stipulated limits. This is done for top purchasers and for small purchases the limit is optional.
  • This insurance provides coverage to large purchasers of clients.

Benefits of Trade Credit Insurance:

  • It protects your business against risks which are out of your control.
  • It increases profits and reduces risks of unforeseen customer insolvency.
  • It improves funding access at competitive rates.
  • It improves bottom line quality of the business.
  • It lets you offer credit to new customers.
  • It optimises bank financing. This is done by insuring trade receivables.
  • It protects from anticipated earnings restatement.
  • It supplements credit risk management.

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