Trade credit insurance works by insuring businesses against buyers failing to pay, so every invoice with that customer is covered for the insurance year. It’s used by businesses of all sizes to protect both international and domestic trade. Trade Credit Insurance Policy provides coverage to supplier of goods and services (excluding financial service) against delay in payment or non-payment of trade credit due to following risk
- Commercial Risks
- Political Risks
Need for Credit Insurance
Your business is likely to be affected by risks which are beyond your control. These entail commercial and political risks. Trade credit insurance has been especially formulated to protect the policyholder’s business against risks which are beyond their control. A comprehensive trade credit insurance policy ensures improvement of bottom line quality, increase profits, and reduce risks of unforeseen customer insolvency. You can also offer credit to new customers. This improves funding access at competitive rates. This is an insurance for short term account, due within 12 months.
What it covers?
Credit insurance policies cover two main types of risks which are classified as commercial and political risks. Here’s what these risks include –
- Commercial risks
Commercial risks include insolvency or bankruptcy of the buyer as well as non-payment of dues by the buyer.
- Political risks
Political risks are risks faced due to political circumstances like the following –
- Cancelling of the import license
- War, riots, revolution, rebellion, etc.
- Any Government decision which prevents payment of dues
- A general moratorium (repayment holiday) granted by the Government of the debtor’s country
- Any type of political events which do not allow payment of dues
- Non-payment by the Government who is the buyer
- Non-payment because of natural calamities in the buyer’s city or country
What is not covered?
Credit insurance policies do not cover repayment defaults due to the following instances –
- Trade disputes
- Sale to an individual using the goods and services for non-professional work
- If payments have been received in advance
- Loss because of fluctuations in foreign currency exchange rates
- Nuclear perils
- Sales done under irrevocable Letter of Credit
- When the goods are not accepted by the buyer
Businesses and companies of all sizes – small, medium, or large – need a safety net to manage the financial risks arising due to customer defaults. Our Liability team at Emedlife has the expertise to advice you about taking a credit insurance that provides safety, security, and peace of mind to grow and expand the business.
Talk to us today for all your Commercial General Liability insurance needs at an affordable price and for reliable claims management.
For registration of claims and to learn more about our claims process please Contact our dedicated claims team for advice on an incident/claim.
D&O Policy protect company director or officer from legal liability arising out of actual or alleged wrongful acts in managing a company.
- The policy covers a wide range of litigation that could arise from customers, vendors, shareholders, employees.
- In addition to defence cost, it provides cover for :
- Investigation Cost
- Entity Protection against Employment Practice Liability claims
- Outside Entity Directorship cover,etc.