Trade Credit Insurance

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In times, when the trading environment is upbeat, various suppliers go with trade credit insurance to protect their debt. However, just having the trade credit insurance doesn’t assure you that the insurer will give you coverage. As there are certain situations when the insurer can refuse to settle your claim under trade credit insurance.
Let’s have a look at those situations when your claim will not be honoured by trade credit insurer=

1.Late claim filing

The common reason behind the rejection of trade credit insurance is late filing of the claim, i.e., filing the claim after the maximum reporting claim given under the insurance contract is over. The insurer rejects late claims because such claims decrease its ability to recover the funds from creditors, if possible. Usually, insurance companies price trade credit insurance in the hope that they will make use of the legal and other recourse to recover at least a certain portion of the default payment.

2.Omission of pivotal details

If at the time of filing the trade credit insurance application form, you have not disclosed the important information, the insurer has all rights to reject your claim. Here, important information could be the fact that you have a history of default payment, or you have debtors which are not declared in the insurance proposal. Many times, insurance applicants do not disclose information to lower its premium rates. However, such actions could prove costly when the insurer can refuse to settle your claim due to non-disclosure of information.

3.Risks that are excluded

Many times, it happens that the policyholder approaches the insurer to get coverage for those risks which fall under the exclusion list of the insurance policy. Many trade credit insurance claims get rejected because they lie outside the terms and conditions of the policy. Here the terms can include the territory and payment conditions, the definition of goods, etc. Further, the insurer can also reject your claim if debtors are government partments.

4.Failure to receive advance payment as per the contract

If the business contract with buyer clearly mentions that the payment should be made in advance, the insurer can reject your claim if you export goods without receiving advance payment as per the contract. It means you can’t export goods without receiving the advance payment if your contract has stated that the payment should be received in advance.

5.Failure to stop shipping

Just having trade credit insurance doesn’t give you the liberty to act carelessly. Your policy requires you to stop shipping to those buyers who are already overdue on their payment. However, if you fail to stop shipping, then the insurer can reject claims pertaining to it.
Along with the above, there are other circumstances as well which are not covered by trade credit insurance, and therefore, the insurer will not offer coverage. Some of the events which are excluded in the policy are:

  • Insolvency or financial default of any party other than debtor
  • Failure of the policyholder or its agent to comply with the material laws in connection with the insured goods
  • Sales made on term of cash on delivery and confirmed or unconfirmed irrevocable letter of credit
  • Nuclear radiation or radioactive contamination, etc.

Read more: What is trade credit insurance
It is imperative to read and understand your entire trade credit insurance policy. The situations or mistakes above are just a few of the scenarios when the insurer can deny your claim. In order to get your claim settled, there are various other conditions also which must be satisfied.
When in doubt, contact SecureNow, a leading corporate insurance advisor for assistance.