Trade Credit Insurance is a policy that protects businesses against the risk of non payment by buyers due to insolvency or default.
How It Works:
- A business purchases a credit insurance policy.
- Sales are made on credit to buyers.
- If the buyer fails to pay, a claim is filed.
- The insurer compensates the business as per policy terms.
Benefits:
- Mitigates credit risk associated with domestic and international buyers
- Safeguards cash flow and protects against bad debts
- Enables businesses to extend competitive credit terms with confidence
- Enhances access to financing by strengthening receivables quality
Example:
An exporter is compensated by the insurer when a foreign buyer fails to make payment due to insolvency.