Trade Credit Insurance
Trade credit insurance, also called accounts receivable insurance, protects the money business customers owe you when they cannot pay. If an insured customer fails to pay a valid invoice for a covered reason such as insolvency or protracted default, the policy may reimburse a percentage of the loss, helping protect cash flow and support growth.
Most business owners insure their building, their inventory, and their vehicles, but leave one of their largest assets uninsured: the money their customers owe them. Trade credit insurance protects that asset.
What it protects against
- Customer insolvency or bankruptcy.
- Protracted default, meaning a customer who simply does not pay within an extended period.
- For exporters, political or country risk that blocks payment, such as war, currency controls, or a government action that stops funds from being transferred.
Who needs it?
Businesses that sell to other businesses on open-account credit terms: manufacturers, wholesalers and distributors, importers and exporters, and service firms that invoice on terms.
The insurer reviews your customer and sets a credit limit, then monitors that customer’s financial health over time. If the customer does not pay a covered invoice, you file a claim, and after the policy’s waiting period and terms are met, the insurer pays the covered percentage of the loss, often in the range of the low-to-mid nineties of a percent of the invoice, subject to the policy. Insured receivables can also make stronger collateral, which may help you borrow more against them.
How do we help?
We look at who your customers are, how concentrated your receivables are, how you finance the business, and where you are trying to grow, then help you decide whether whole-portfolio, key-account, or single-customer coverage fits.
Trade credit protects receivables, an exposure no property or liability form reaches. The wider program is on our business insurance page.
What triggers a trade credit claim, and what does the policy need from you first?
Two events: a customer’s insolvency, or a protracted default, meaning an invoice unpaid for a stated period after due date, commonly 90 to 180 days. The policy pays a percentage of the insured receivable, typically 80 to 95 percent, with the balance retained by you. The conditions matter more than on most forms. Coverage applies only to buyers approved by the insurer up to a credit limit the insurer sets, so a sale above the approved limit is uninsured to that extent. Claims have to be reported within a stated window after default, and the policy usually requires you to have followed your own stated credit and collection procedures. A receivable insured on paper but sold outside the approved limit, or reported late, is not insured in fact. No California statute governs this coverage directly; it is a contract question, and the underwriter’s buyer approvals are the document that controls.
