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?
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of this extended period the limit cover is withdrawn and you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.
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
Decide suitable limits for your customers
the underwriter if you are not paid by an agreed date
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