What if one of your customers fails to repay your dues? Irrespective of the size of your business, a default payment can affect your business financially. To get protection from non-payment of debts, it is essential to buy trade credit insurance. The insurance policy becomes active if your client doesn’t pay on time or delay the payment.
Trade credit insurance is a type of insurance that helps businesses protect themselves against the financial risks of selling goods or services on credit. It covers the loss of revenue that may occur as a result of a customer’s inability to pay their debts, whether due to insolvency or prolonged default. A trade credit insurance policy typically includes coverage for both domestic and international sales and can be customized to meet the specific needs of the business. It may also include coverage for political risks, such as war or currency fluctuations. When purchasing trade credit insurance, businesses typically work with an insurance broker or agent to assess their risk and determine the appropriate level of coverage. The premium for the trade credit policy is based on the creditworthiness of the business’s customers and the level of risk involved. To make a claim, the business typically has to provide proof of the customer’s inability to pay, such as a copy of a bankruptcy filing. It is important to note that trade credit insurance is not a substitute for good credit management practices, and businesses should still perform credit checks and due diligence on their customers. Here is the infographic to help you understand trade credit insurance policy.
