All you need to Know about Trade Credit Insurance in USA in 2024

Trade AND Businesss Credit Insurance

This insurance, also referred to as accounts receivable insurance, protects companies in the event that a customer defaults on a trade debt.

This typically takes place when a consumer becomes destitute or is unable to pay within the contractual terms (a prolonged default). Up to 95% of the debt due to you is covered by credit insurance.

Trade credit insurance also provides you with access to top-notch information and data to help you make trading decisions. This makes it possible for companies that buy trade credit insurance to increase sales to both new and existing clients without taking on more bad debt.

What Does Trade Credit Insurance Not Cover?

Understanding what trade credit insurance is not is also crucial. Credit insurance is not meant to take the place of careful, responsible credit management. Any credit insurance policy and partnership should be built around sound credit management procedures. Beyond indemnity, credit insurance augments and improves the work of a credit specialist rather than taking the place of a business’s credit practices.

Only business-to-business accounts receivable are protected against political and commercial risks by trade credit insurance. If your company does not engage in direct trade with a customer (another business), then outstanding debts are not covered.

Different Types of trade credit insurance policies:

Trade credit insurance comes in four varieties, which are explained below. The type of coverage you select, your industry, the amount of annual income you need to insure, your past history of bad debts, your current internal credit procedures, and the creditworthiness of your clients are just a few of the variables that will affect the cost of your policy.

Whole Turnover: This kind of trade credit insurance guards against all clients failing to pay their commercial debt. You can choose whether all domestic sales, all overseas sales, or both are covered by this coverage.

Key Accounts: You choose to insure your biggest clients with this kind of coverage since their nonpayment would put your company at the most danger.

Single Buyer: You can choose a trade credit insurance coverage that protects you against a single customer’s possible default if the majority of your transactions are with them.

Transactional trade credit insurance is ideal for businesses with a small number of sales or a single client since it offers protection against nonpayment on a transaction-by-transaction basis.

What kind of business needs trade credit insurance?

Effective credit management has benefits for all businesses. For that reason, one of the most crucial instruments is trade credit insurance. Trade credit insurance might be quite advantageous if you sell to other firms on open account terms. We offer services that help boost and assist your trading activity regardless of the terms on which you deal.

A variety of trade credit packages have been developed by us to accommodate various business and transaction kinds. Effective credit management has benefits for all businesses.

Please contact us so we can talk about what might work best for you.

How much does trade credit insurance cost?

The premium is calculated for your business and the way you trade. This helps us make sure you receive the best match and service excellence for your business as well as an affordable premium.

If you haven’t used it before, here’s how to work out what it might cost for one of our more popular policy types. The premium is based on a percentage of your sales, conservatively around 0.25% – often below, sometimes above. Suppose your sales were $20 million last year and you want to cover that entire revenue. Then the premium would usually be less than $50,000.

Premiums can change depending on multiple variables. Visit our Cost of Credit Insurance page to learn more.

I work in a small business. Do I need trade credit insurance services?

Our insurance is designed for businesses with sales of at least $5million per year, but companies with sales of as little as $1million sometimes find our services to be a good fit, depending on the situation. If your sales are lower than this, our insurance may not be the most suitable product for you. We suggest you speak to your insurance broker or business bank manager who will be able to point to other ways you can protect your business.

I’ve been dealing with the same buyers for years. Do I really need to worry?
Many businesses trade with long standing customers that seem well funded. They believe payment can be relied on. However, even the strongest commercial concerns can be affected by the economic cycle and commercial trends.

One Allianz Trade customer, EDPA, experienced this scenario when one of their oldest customers filed for bankruptcy and disputed EDPA’s receivables. Read the EDPA case study for details.

“The Allianz Trade team made us feel so comfortable about the situation and confident that it would get resolved. When you are facing an enormous financial loss, having someone knowledgeable, supportive, and responsive in your corner can make all the difference. We are very, very happy with the service we received.”
– Alp Benadrete, Managing Partner in Charge of the Home Textile Division for EDPA

It takes considerable investment in data collection to keep track of customers’ financial health and to evaluate the risk of non-payment. We make that investment so you don’t have to and we make the analysis available to you. Insurance backed by insight allows you to trade with peace of mind through all phases of the cycle – today and tomorrow.

I have some long-term deals (more than a year) in progress. Can I cover them?
Yes, we have experience in supporting longer term transactions (for example, multi-year contracts). Get in touch with us and let us know what you need. We’ll be pleased to make recommendations.

If payments are affected by political events, would trade credit insurance aid me?

Indeed. Coverage for non-payment resulting directly from events in the buyer’s nation might also be advantageous to exporters who are worried about political developments. International credit insurance businesses typically provide assistance in the event of a war or a local government contract cancellation. Another instance would be if a government enforces laws that prohibit the import or export of goods or prohibit the movement of hard currency.