Trade Credit Insurance is a vital risk management tool that shields businesses from bad debts, safeguarding their accounts receivable against unpaid invoices due to customer bankruptcy, default, or political risks. Also known as debtor insurance, export credit insurance, or accounts receivable insurance, it offers flexible coverage tailored to individual business needs for both domestic and export customers.
This insurance ensures that businesses get paid even if customers fail to pay, providing protection for trade transactions. It’s utilized by businesses of all sizes to secure finance, explore new markets confidently, and attract customers with favorable credit terms. The coverage level and cost vary based on factors like the size of the credit portfolio, customer risk, and market location.
Operating a Trade Credit Insurance policy involves agreeing on credit terms with insurers, utilizing buyer ratings for due diligence, and receiving ongoing support and market insights. In case of unpaid invoices, insurers attempt debt recovery and pay out according to the policy terms, often up to 90% of the debt.
Benefits of Trade Credit Insurance extend beyond protecting accounts receivable, including expanding customer base, enhancing trade confidence, ensuring cash flow, improving supplier and employee relationships, facilitating access to finance, meeting risk management requirements, and potentially serving as a tax-deductible business service. It is suitable for businesses of all sizes, from SMEs to large corporations.
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