About Credit Insurance


What is Credit Insurance?

Trade Credit Insurance or bad debt cover, is an insurance policy and risk control product that covers the money owed to you by your customers once you have supplied your product or provided a service on credit. This means that it covers non payment by a customer.

Who gets insured?
Credit Insurance is normally a whole turnover policy which means that you insure all UK and Export customers. Some companies however choose to insure only UK customers and a few may decide to insure only Export. If you deal with a large company, such as a multinational supermarket, it is accepted by most underwriters that specific buyers may be excluded from the policy.

What is insured?
It is the estimated turnover that is insured. This will be less VAT, sales to any government body and inter company trading. It will also exclude pro forma and other non credit transactions.

Making a claim
A policy pays an agreed percentage, normally 90% of any invoice or outstanding balance that remains unpaid as a result of late payment, insolvency or bankruptcy. Most claims made on UK customers are due to a customer becoming insolvent either through administration, receivership or bankruptcy.

How much to insure?
All policies require that accounts be reported when they become seriously overdue. This means that if your terms are 30 days end of month and you invoice a customer in January with payment due on March 1, then a policy will cover a further agreed period while the oldest January invoice is still unpaid. This can be from 30 to 60 days depending on the type of trade. At the end of this extended period the limit cover is withdrawn and you are required to report the customer as being overdue. Based on this overdue reporting a credit limit to cover sales of £10,000 per month would have to be at least £30,000 (January, February and March). At this stage your approved credit limit would be on stop and you would inform the underwriter.

Additional benefits
Most underwriters will provide on-line credit vetting and some provide a collection service. As a broker, our service is free as we are paid commission by the underwriter. However we work for you not the underwriter.

How does it work?
Once we have found the right policy for you all you have to do is follow 3 steps;
Decide suitable limits for your customers
Notify the underwriter if you are not paid by an agreed date
Make a claim for non payment when necessary

How else we can help?
In reality you will not obtain limits on all of your customers and having a broker acting on your behalf can really make a difference. Whether by appealing limit decisions for you, helping to report an overdue or chasing a claim payment, it is good to have someone on your side. Our partnership will range from routine assistance on a daily basis right through to an annual review of each underwriter prior to the expiry of your policy.

 

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