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How Much Is Trade Credit Insurance?

By July 12, 2019 No Comments

How Much Is Trade Credit Insurance? | Niche Trade Credit BlogHow Much Can I Expect To Pay?

Trade credit insurance is a great risk management tool, which you can use to protect your company from bad debt, protracted default, long debt collection times, and political risk.

Trade credit insurance protects your accounts receivable and your balance sheet, and lets you get paid even if one of your international business partners fails to pay service on credit, or for pay for goods on your specified credit terms. But how much does trade credit insurance cost, and how much can you expect to pay for coverage? In this article, we’ll answer that question. Read on for more details.

What Factors Affect The Cost Of Trade Credit Insurance?

There are a number of different factors which can affect credit risk. Depending on your internal credit management strategy, the cost of trade credit insurance can vary quite a bit.

1. The countries in which you operate – If you operate primarily in countries that are very stable, such as America, Australia, and Western European countries, the cost of trade credit insurance will be lower, compared to the cost of trade credit insurance for companies working in the developing world.

2. Client creditworthiness – Typically, you must prove the creditworthiness of a client before taking out a trade credit insurance policy, and place credit limits on your clients. The more creditworthy your clients are, the lower the risk of default.

3. Total value of invoice/contracts – The total amount of outstanding internal credit that you’ve extended to your clients for your goods and services has an effect on the cost of your trade credit insurance policies. The more credit risk you’ve taken on, the higher the cost will be when looking for a policy on the trade credit insurance market.

4. Percentage of compensation – Depending on your trade credit insurance policy, you may be eligible to get somewhere between 75-100% of the value of the invoice that went unpaid by your client. While a higher percentage of compensation like 90% will help keep your cash flow healthy and minimize losses, it will also cost more to take out a trade credit insurance policy that covers such a high percentage of losses.

While there are some other factors that can affect the cost of a trade credit insurance policy, the ones we’ve listed above typically have the largest effect. Now that we’ve discussed a few of these factors, let’s discuss how much trade credit insurance typically costs.

How Much Does Trade Credit Insurance Usually Cost?

The costs for your company can vary quite a bit – due to the factors listed above – but most trade credit insurers will offer coverage in the price range of about 0.1-0.3 cents per dollar. A business with $20m AUD of invoices, for example, may pay $20,000-$60,000 for a trade credit insurance policy that covers their accounts receivable.

Get Trade Credit Insurance For Less With Niche Trade Credit

With proper credit control policies and a trade credit insurance policy, you’ll never have to worry about protracted default and debt recovery again. Niche Trade Credit is here to help you get the protection you need. As one of Australia’s leading trade credit insurance brokers, we can help you get coverage – and protect your company from unpaid business debts. Contact us now to learn more.

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