What is Trade Credit Insurance? – Trade Credit Insurance Market - Tradingcredit,net

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Trading goods and services with your customers comes with risks

Trade credit insurance provides cover for businesses if customers who owe money for products or services do not pay their debts, or pay them later than the payment terms dictate. It gives businesses the confidence to extend credit to new customers and improves access to funding, often at more competitive rates. Trade credit insurance is for products and services that are due within 12 months.

What is Trade Credit Insurance?
Cover can be obtained by companies trading within the UK as well as internationally, and in addition trade credit insurers help their customers manage risk by providing guidance and advice about credit risks and new markets to help businesses expand.Businesses can buy trade credit insurance for their entire portfolio of customers

With trade credit insurance is protected against both commercial and political risks that are beyond their control knowing that money owed to them will be paid. This helps firms to grow profitably, supporting them at all stages of thebusiness cycle and minimising the risk to them of unexpected customer insolvency.

Trade credit insurers will generally cover two types of risk that a business can include in their cover:

How Does Trade Credit Insurance Work?

Can your business afford a bad debt?
Credit insurance protects your cash flow. It covers your trade with your customers, so that you still get paid even if they go under or fail to pay you.

Trade credit insurance works by insuring you against your buyer failing to pay, so every invoice with that customer is covered for the insurance year up to the terms of your policy.

It’s used by businesses of all sizes to protect both international and domestic trade. Businesses also use credit insurance to help them secure finance and working capital with banks, explore new markets with confidence and attract new customers with favourable credit terms.

As with all types of insuranceThe level and cost of your credit insurance will be dictated by your needs. For example the size of your credit portfolio, level of risk associated with your customers and location of your market will be unique to your business. Most trade credit insurance solutions will therefore be tailored to your requirements.

Operating Your Credit Insurance Policy
Step I: Agree credit terms with your customer and insurer
Your trade credit insurer should monitor the financial health of your customers and potential customers and apply a risk rating

This is their assessment of how likely your customers are to pay your invoices on time. It will guide how much of your exposure they are prepared to insure.

The buyer rating is also a useful tool for you. You can use it as a guide to support your own due diligence and help you avoid potentially risky customers. A strong buyer rating can also help you secure potential buyers by offering them favourable credit terms.

Step II: Trade with confidence
Continue with business as usual. Some insurers will leave you alone. Some will provide ongoing support. At Atradius Trade Credit Insurance, we’ll share the market knowledge and expertise of our underwriters with you through regular trading reports and sector analysis.

Step III: Deal with an unpaid invoice
Not paid? Let your insurer know. Most insurers will first try to recover the debt. Ideally their first approach will be amicable. or they may want to renegotiate payment terms.

If your insurer offers a debt collection service as part of your insurance packagethey will start debt collection procedures. For example, if your customer has gone bankrupt they will deal with a receiver or liquidator on your behalf.

your insurer should pay up in line with your policy, often up to 90% of the debt. Whether through debt collection or insurance you should get all or most of the money owed to you.

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