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How Much Does Trade Credit Insurance Cost?

Check what are the factors that would affect your credit insurance cost & premiums.

To take control of your cash flow management, consider to take benefits from Trade Credit Insurance.

It’s an important business tool that helps you lower the trade risk for bad debts or unpaid accounts receivable.

If you are curious about how much Trade Credit Insurance costs, remember this: There are ways you can help control credit insurance costs and make a good Trade Credit Insurance investment that helps you grow your business.

Learn about the cost of covering your buyers

Trade credit insurance protects businesses from overdue payment, late payment or non-payment of commercial debt. It covers your business-to-business accounts receivable. If you do not receive what you are owed due to a buyer’s bankruptcy, insolvency or other issue, or if payment is very late, a trade credit insurance policy will reimburse you for a majority of the outstanding debt. This helps you protect your capital, maintain your cash flow and secure your earnings while extending your competitive credit terms and helping you access more attractive financing.

With trade credit insurance, you can reliably manage the commercial and political risks of trade that are beyond your control. Trade credit insurance can help you feel secure in extending more credit to current customers or pursuing new, larger customers that would have otherwise seemed too risky. 

You may decide to invest in trade credit insurance if you are looking to:

  • Expand sales with confidence, whether selling more to existing customers or pursuing new customers.
  • Access better financing terms, as banks will typically lend more capital against insured receivables.
  • Make your best possible business decisions by accessing your trade credit insurer’s information risk data quickly.
  • Protect against non-payment and catastrophic loss.
  • Expand into new international markets, backed by protection from unique export credit risks and the market knowledge to make accurate growth decisions.
  • Reduce bad-debt reserves, freeing up capital.

The cost of your trade credit insurance policy will vary depending on your industry, your annual revenue that needs to be insured, your history of bad debt recovery, your current internal credit control procedures and your customers’ creditworthiness, among other factors.

If you sell to clients in a mix of industries and countries, your trade credit insurance rates will reflect the risk determined to be associated with all of them.

How is your trade credit insurance premium calculated?

Your credit insurance premium is based on a percentage of your sales, conservatively around 0.25 cents on the dollar. If your sales were $20 million last year and you want to cover that entire revenue, your premium would typically be less than $50,000.

A trade credit insurance policy can typically offset its own cost many times over, even if you never make a claim, by increasing your sales and profits without taking on additional risk.

Getting a trade credit insurance quote is the most accurate way to determine cost. There are many different policies designed to cover specific business needs.

Your Trade Credit Insurance premium can change depending on multiple variables, including but not limited to:

  • The type of policy you choose.
  • The percentage of risk being covered for each transaction.
  • Losses your business has experienced in the past.
  • Your business’ full financial history.
  • Your industry.
  • Your customers’ financial standing.
  • The country in which you are doing business.
  • Political risk.

When your trade credit insurance policy premium is calculated, one of the first factors considered is the industry you are in and your business’s financial and trading history. Your turnover and loss history, credit terms and receivables history will be reviewed. If your history shows a high number of defaults by clients, it doesn’t necessarily mean you will have a higher trade credit insurance premium. Many factors are considered and some that can outweigh a poor receivables history include market outlook for your industry and future demand for your products.

Next, important information about your trading partners is factored in. It’s important for your insurer to know about the creditworthiness of your trading partners and the history they have with you.

In addition, it is important for your insurer to understand where in the world your customers are located. They want to understand the risks associated with a country’s infrastructure, political climate and economic outlook. If you sell to a mix of clients in different countries, your rates will reflect the risk across all of them. Conversely, if you sell only to a particular high-risk industry in only a few countries, your rate may be higher due to the increased risk. Finally, the annual revenue you want insured and the type of trade credit insurance policy you choose will be factored in.

Clients worldwide
83 Million
Businesses monitored in 160 countries
AA Rating
by Standard & Poor's
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Get answers to common questions
about Credit Insurance.
Credit management is defined as your company’s action plan to guard against late payments or unpaid invoices by your customers. An effective credit management plan uses a continuous, proactive process of identifying account receivable risks, evaluating their potential for loss and strategically guarding against the inherent risks of extending credit. Having a credit management plan helps cash flow forecast, optimizes performance and reduces the possibility that a default will adversely impact your business. Late payment and payment default situations happen with alarming frequency – it’s critical to the financial health of your company to minimize them. Many businesses find it challenging to properly evaluate and track the creditworthiness of new customers. And when conducting business with foreign customers, customer's credit risk management becomes even more complex because it can be difficult to interpret and rely on information used by foreign countries to measure creditworthiness.