AT A GLANCE
How the cover works
Trade Credit insurance protects the receivables created when a business supplies goods or services on credit. It can reduce the effect of customer insolvency or prolonged default and support disciplined credit decisions.
The insurer will examine turnover, customer concentration, payment terms, bad-debt history, credit-control procedures, markets and the quality of information available on buyers.
COVER
What may be covered
- Insured invoices owed by a customer that becomes insolvent.
- Protracted default where payment remains outstanding beyond the policy’s defined period.
- Selected political risks affecting payment by overseas buyers where included.
- Credit monitoring, buyer-limit decisions and market intelligence provided as part of the arrangement.
- Debt collection or recovery support under the policy’s procedures.
Cover varies by insurer and applies only as stated in the schedule and policy wording.
BOUNDARIES
Common exclusions and limitations
- Disputed debts until the dispute is resolved in favour of the insured.
- Sales made beyond an approved buyer limit or outside agreed payment terms.
- Known overdue accounts, pre-existing adverse information or customers not declared as required.
- Interest, penalties, consequential losses and amounts not represented by an insured trade debt.
- Failure to follow notification, collection, credit-control or insurer-consent requirements.
This is not a complete list. The quotation, schedule and full wording determine the actual cover.
CLAIMS IN PRACTICE
How a claim might arise
01. A major customer enters insolvency owing several insured invoices for delivered goods.
02. An overseas buyer remains in prolonged default despite collection activity and no valid dispute exists.
03. A political event prevents transfer of currency for an otherwise valid insured export debt, where that extension applies.
These scenarios are illustrative only and do not confirm that a particular claim would be covered.
CHOOSING COVER
Questions worth resolving
- Analyse concentration: one customer failure can outweigh many successful sales.
- Decide whether whole-turnover, key-account or selected-risk structures are appropriate and available.
- Set realistic credit limits and report adverse information promptly.
- Align maximum credit terms, overdue-reporting periods and collection procedures with internal systems.
- Understand the percentage insured, deductible, waiting period and maximum liability.
CONNECTED RISKS
Related protection to consider
- Political Risk for non-payment or interference connected with sovereign and political events.
- Crime Insurance for fraudulent internal or external payment activity.
- Cyber Insurance for digital incidents affecting invoicing, systems or customer data.
- Business Interruption for loss of income following insured physical damage rather than debtor default.
QUESTIONS
Frequently asked questions
Does Trade Credit Insurance guarantee every invoice?
No. Cover depends on approved buyers, limits, terms, reporting and the policy’s insured percentage and exclusions.
Can one major customer be insured?
Sometimes, but availability and pricing depend on the buyer and market. Many arrangements insure a broader portfolio.
What is protracted default?
It is non-payment continuing beyond the period defined in the policy, without formal insolvency and subject to the policy conditions.
Does it replace credit control?
No. Effective credit control is fundamental, and the policy normally requires agreed procedures to be followed.
Australian insurance context
For Australian organisations, Trade Credit Insurance Guide should be considered against the actual activities, location, scale, contracts, assets and risk controls of the business. Insurance requirements and insurer appetite can vary by state or territory and by the way the risk is presented.
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