Trade Credit

Trade credit insurance protects manufacturers, traders and service providers against losses from non-payment of a commercial trade debt. If a buyer does not pay (often due to bankruptcy or insolvency) or pays very late, the trade credit insurance policy will pay out a percentage of the outstanding debt.

The way this insurance works, when businesses take out a trade credit policy, they are usually required to disclose the specific debtors they want to insure. Although some policies are more general in nature and insure all the firm’s debtors. “In the event a debt is unpaid, the policy holder may be able to claim up to 90 per cent of the amount of that debt, taking into account any excesses that may be relevant.