What is Trade Credit Insurance | Features & Benefits | Coverage

What is Trade Credit Insurance?

Trade Credit Insurance is considered as credit insurance which is known as a risk management tool that provides coverage for the payment risk resulting from the delivery of goods or services. If you are a business person, you may aware of the fact that your business is likely to be affected by any kind of risks which are beyond your control. These include commercial and political risks.
Trade credit insurance policy has been especially designed to shield your business from the credit which is beyond your control. For an example, if you are a manufacturer in India and sell goods to your international client on credit basis and the purchaser creates issue for paying the payment, then this trade credit insurance policy will provide all the coverage on behalf of the defaulter.
In other words, a comprehensive trade credit insurance policy makes sure the improvement of bottom line quality, increase profits of your business and the most important thing is it reduces the risks of unforeseen customer insolvency. By owning a trade credit insurance policy, you can also offer credit to the new customers.

Salient Features & Benefits of Trade Credit Insurance Policy

• This Trade Credit Insurance policy can be purchased or renewed online
• Policy is available for domestic supplier and exporter
• This policy is ideal for those companies who sell their goods on open account basis.
• Trade Credit Insurance Policy offers coverage to the supplier of goods and services against any delay in payment or non-payment of trade credit due to the commercial or political risks.
• This policy safeguards your business against any kind of risks which are out of your control.
• If you own Trade Credit Insurance policy, you can improve the bottom line quality of the business.
• This insurance policy develops funding access at competitive rates.
• It reduces risks of unanticipated customer insolvency and increases profits.
• This Trade Credit Insurance coverage works as the supplements of credit risk management.

Coverage Provided by Trade Credit Insurance

The Trade Credit insurance policy is calculated to cover the policyholders against the commercial and political risks of their buyer’s default. That means this Trade Credit insurance coverage provides safeguard for your business. The aim of this insurance policy is to help the companies to achieve goals by turning over their sales into cash conversation. The reasons for losses covered under this policy are:
• Bankruptcy or Insolvency: If you own Trade Credit insurance policies, you can be able to safeguard your business against the risk of non-payment if a buyer becomes bankrupt.
• Protracted Default: If the buyers fail to pay the receivable within the defined period of time calculated from the due date of payment of the receivable, then you will get coverage.
• Political Risks: If you are looking for the exports coverage, the policyholder gets an option to provides coverage for political risks that covers non- payment due to Moratorium, Inconvertibility, War, Import/ Export Restriction, Natural Disaster, License Cancellation etc.
Apart from all these, this Trade Credit insurance policy covers the complete turnover with predetermined limits. And this process is done for the top purchasers and for small purchases the limit is optional.

Major Exclusions of Trade Credit Insurance

In spite of the fact that this trade credit insurance policy provides an ample range of coverage, but there are some exclusions.
• This policy doesn’t provide coverage for trade disputes, currency changeability risk.
• Receivable occurring from financial services are not covered
• Any punishment or damages which are buyer entitled to pay are not covered by this Trade Credit insurance policy.
• Pre-shipment risk is excluded from this coverage.
• Any kind of advanced sales, sales against BG/LC, sales to individuals are not covered.
• Purchasers under direct or indirect control and the transactions made after termination of coverage under the policy are not covered by Trade Credit insurance policy.
At the end, it can be said that if you are a business owner, you must opt for a Trade Credit insurance plan. This plan provides a sense of security for your business. However, before choosing, you should compare Trade Credit insurance quotes available online.