If you’re interested in purchasing trade credit insurance for risk management of your balance sheet, and to protect your accounts receivable from bad debt, and you’re wondering how much you can expect to pay, we’re here to help.
Learn more below about what trade credit insurance protects, and how much you can expect to pay for this protection, by understanding what affects your premium rates.
- The Country In Which You’re Doing Business
Depending on which country you’re planning on doing business, your premiums may be higher or lower. If you’re exporting to North America to the US or Canada, for example, you’ll pay less than if you were exporting to a developing country in Africa, where the risk of non-payment could be greater.
If you work in developing countries, you may also need political risk insurance. This is a separate policy often added to trade credit insurance, to protect from political risks like violence, breach of contract, asset seizure and forfeiture, and currency problems.
- The Creditworthiness Of Your Clients And Customers
If you have good internal credit control systems in place, and typically only allow trade debts for customers who have a history of paying on time, you’ll pay less for your trade credit insurance premium.
In contrast, if you work with companies who have a history of defaulting on their debts, or have poor creditworthiness, you’ll pay more for your monthly premiums. In some cases, you may not be able to insure a debt at all, as it may be too risky, and the insurer may refuse to issue a trade credit insurance policy.
- Total Value Of An Invoice Or Contract
The more valuable a contract or invoice is, the more it will cost to insure, because the loss for the insurance company will be greater if the company fails to pay.
- Percentage Of Compensation
When a transaction falls through, your trade credit insurance company will provide you with a set percentage of its value as compensation. This can be as high as 90-100% of the value of the transaction.
However, if you want a lower premium rate, you could ask to insure only 70-85% of the value of the transaction. This would result in a much lower premium, which can enhance your cash flow – and as long as you are provided with enough compensation to stay in business, you will still be protected.
Get More Details From Niche Trade Credit Now!
This is just a high-level overview of what factors can influence the cost of trade credit insurance services. If you’d like to see an example contract, get a quote for a premium, or just learn more, we recommend you contact Niche Trade Credit right away. We’d be happy to help.
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