Trade your worries about getting paid in full when goods are shipped out by protecting you against any missed payments with this Life & Health coverage. It can also protect you from financial losses that could arise due to default or bankruptcy of suppliers who may not be able to pay their debts as they fall behind on delivery promises, all at no extra cost!
In addition to increasing existing credit lines, a trade credit insurance policy can be used to increase trading lines to various buyers. While the seller primarily determines the individual credit risks of the buyers that finance the receivables, trade credit insurance policies can help increase the collective risk of the seller’s receivables to an A+ rating. In addition, commercial bankers generally view trade credit insurance favourably. You should research a lot before deciding on one.
What are the benefits of trade credit insurance?
Protection against non-payment risk
While trade credit insurance is most commonly known for protecting export and foreign accounts receivable, it can also protect domestic accounts receivable. As your customer base grows, the amount of money you owe to each customer may increase. Trade credit insurance can protect you from a loss if the customer fails to pay you. In addition, credit insurance premiums are tax-deductible.
As the global economy has dropped to record lows, so has the risk of non-payment from customers. Many of these non-payments are not followed by any notice. Prolonged defaults can lead to bankruptcies. Trade credit insurance is one way to protect your balance sheet from this growing threat. Without it, you will face financial ruin if a customer does not pay you. Credit insurance can help you get the money you need in such a situation.
Stabilisation of cash flow
Trade credit insurance is essential to the growth and survival of businesses, particularly those that deal with accounts receivable. By reducing the risk of non-payment, trade credit insurance enables businesses to expand sales and increase revenue. The benefits are numerous and include taking more risks and increasing sales. Moreover, credit insurance is a helpful tool for evaluating customers’ creditworthiness. Therefore, it may also help businesses improve their sales and increase revenue.
Trade credit insurance protects a company’s debtors’ ledger and provides access to more effective and convenient financing. The insurer recognises trade credit insurance as collateral and offers additional funding, and in turn, shareholders can appreciate their assets and corporate obligations being protected. In addition, the insurers’ refusal to cover a claim may reflect a business’s increased financial risk, and the company might have to restructure its terms and conditions.
Reduced risk of insolvency
Trade credit insurance protects your accounts receivable from losses arising from the insolvency of debtors. Premiums are usually calculated as a percentage of sales for the month or your total outstanding receivables. This type of insurance is not available to individual consumers. Hence, it is essential to understand your risks and the risks associated with trade credit insurance to choose the best solution for your business.
Trade credit insurance offers protection against bad debt losses and can help offset the additional premium you will pay. It can also protect your existing customers from potential non-payment and help you adjust your credit limits when the economic conditions change. Self-insurance is another option that entails putting a reserve on your balance sheet and preventing you from investing in growth opportunities. Trade credit insurance can help you reduce your risks of failure to pay and protect your business assets.
If you’re looking to protect your business from the risk of bad debt, trade credit insurance is an intelligent choice. Comprehensive policies cover many risks and your entire portfolio or just vital buyers. Essential buyers can be individually covered or part of a smaller portfolio. Trade credit insurance companies offer tailored solutions that fit your business’ needs.
The cost of trade credit insurance is calculated based on your company’s turnover and risk level. The premium varies depending on how much of your insurable sales, what types of customers you have, and even your business sector.
Many businesses are concerned about the political and credit risks involved in international trade, but how do they protect themselves? A good policy should help to limit the risks associated with geopolitical tensions. For multinational companies, political risk insurance can help limit the losses from terrorism.
This policy protects against the loss of foreign assets and investments due to a specified political event, such as a currency collapse or a default by an obligor. Trade credit insurance can also help companies protect their cash flow from unexpected loss if a customer defaults on payment. Trade credit insurance covers such risks for domestic and international trade. However, it is essential to note that trade credit insurance is inappropriate for all businesses.