Broker-arranged
Trade credit insurance
Trade credit insurance pays you when a customer you’ve invoiced doesn’t pay because they’ve become insolvent or simply defaulted. For a business that sells on 30-day terms, it’s cover for the biggest number on the balance sheet. Here is how it works, what it costs to run, and how a licensed broker arranges it.
- Insolvency and protracted default
- Whole ledger or key customers
- One short form, then a licensed broker takes it from there
What is trade credit insurance?
Trade credit insurance covers your accounts receivable. If a customer becomes insolvent, or fails to pay within an agreed period after the due date, the insurer pays an agreed percentage of the unpaid invoice, commonly 80% to 90%. Policies can cover your whole ledger, your largest customers, or a single contract. The insurer also sets a credit limit for each customer, which doubles as an independent check on who you extend terms to.
It doesn’t replace good invoicing. business.gov.au’s guidance on invoicing and payment terms is the first line of defence; the policy is the second.
What’s usually covered, and what isn’t
Usually covered
- Customer insolvency, including liquidation and administration.
- Protracted default, when a solvent customer still doesn’t pay after the waiting period.
- Export customers, with political risk as an option.
- Collection costs, in many policies.
Usually not covered
- Disputed invoices. The debt has to be undisputed.
- Sales above a customer’s credit limit.
- Related companies and sales to government, in many policies.
- Cash and pro-forma sales. There’s no credit risk to insure.
What changes the price
No prices on this page. A broker arranges quotes from the specialist credit insurers.
How to get trade credit cover through us
Trade credit insurance questions
Who buys trade credit insurance?
Wholesalers, manufacturers, importers, labour hire firms and any business that sells on credit terms to other businesses, especially where a few customers make up most of the sales.
Does trade credit insurance cover slow payers?
Yes, through protracted default cover, once the invoice is past due by the waiting period in the policy. Disputed invoices are excluded.
Can I insure one big customer?
Some insurers write single-buyer or key-account policies. Whole-ledger cover is usually cheaper per dollar insured.
Does it help with finance?
Insured receivables are often easier to borrow against, because the lender’s security is protected. Ask your financier.
Why is trade credit insurance arranged by a broker?
It’s written by specialist insurers who assess your ledger and set customer limits, so a licensed broker arranges it rather than an online quote.
Keep reading
More broker-arranged cover
Sources
Trade credit