Trade Credit Insurance Cost & Pricing

Trade Credit Insurance Cost and Pricing

To take control of your cash flow, consider the benefits of trade credit insurance. It’s an important business tool that helps you lower the risk for bad debts or unpaid accounts receivable. If you are curious about how much trade credit insurance costs, remember this: there are ways you can help control those costs and make a good trade credit insurance investment that helps you grow your business. This additional growth often helps offset the cost of trade credit insurance.

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What does trade credit insurance cover?

Trade credit insurance protects businesses from non-payment of commercial debt. It covers your business-to-business accounts receivable. If you do not receive what you are owed due to a buyer’s bankruptcy, insolvency or other issue, or if payment is very late, a trade credit insurance policy will reimburse you for a majority of the outstanding debt. This helps you protect your capital, maintain your cash flow and secure your earnings while extending your competitive credit terms and helping you access more attractive financing.

With trade credit insurance, you can reliably manage the commercial and political risks of trade that are beyond your control. Trade credit insurance can help you feel secure in extending more credit to current customers or pursuing new, larger customers that would have otherwise seemed too risky.

You may decide to invest in trade credit insurance if you are looking to:

Expand sales with confidence, whether selling more to existing customers or pursuing new customers.
Access better financing terms, as banks will typically lend more capital against insured receivables.
Make your best possible business decisions by accessing your trade credit insurer’s information risk data quickly.
Protect against non-payment and catastrophic loss.
Expand into new international markets, backed by protection from unique export risks and the market knowledge to make accurate growth decisions.
Reduce bad-debt reserves, freeing up capital.

What does trade credit insurance cost?

The cost of your trade credit insurance policy will vary depending on your industry, your annual revenue that needs to be insured, your history of bad debts, your current internal credit procedures and your customers’ creditworthiness, among other factors.

If you sell to clients in a mix of industries and countries, your trade credit insurance rates will reflect the risk determined to be associated with all of them.

How is your trade credit insurance premium calculated?

Your credit insurance premium is based on a percentage of your sales, conservatively around 0.25 cents on the dollar. If your sales were $20 million last year and you want to cover that entire revenue, your premium would typically be less than $50,000.

A trade credit insurance policy can typically offset its own cost many times over, even if you never make a claim, by increasing your sales and profits without taking on additional risk.

Getting a trade credit insurance quote is the most accurate way to determine cost. There are many different policies designed to cover specific business needs.

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Common factors influencing credit insurance cost & premiums

Remember, your trade insurance premium can change depending on multiple variables, including:

The type of policy you choose and the percentage of risk being covered for each transaction.
Losses your business has experienced in the past.
Your business’ full financial history.
Your industry.
Your customers’ financial standing.
The country in which you are doing business.
Political risk.

When your trade credit insurance policy premium is calculated, one of the first factors considered is the industry you are in and your business’s financial and trading history. Your turnover and loss history, credit terms and receivables history will be reviewed. If your history shows a high number of defaults by clients, it doesn’t necessarily mean you will have a higher trade credit insurance premium. Many factors are considered and some that can outweigh a poor receivables history include market outlook for your industry and future demand for your products.

Next, important information about your trading partners is factored in. It’s important for your insurer to know about the creditworthiness of your trading partners and the history they have with you.

In addition, it is important for your insurer to understand where in the world your customers are located. They want to understand the risks associated with a country’s infrastructure, political climate and economic outlook. If you sell to a mix of clients in different countries, your rates will reflect the risk across all of them. Conversely, if you sell only to a particular high-risk industry in only a few countries, your rate may be higher due to the increased risk.

Finally, the annual revenue you want insured and the type of trade credit insurance policy you choose will be factored in. The four types of trade credit insurance policies include whole turnover, key accounts, single buyer and transactional coverage.

Trade credit insurance policies and features

Trade credit insurance is not “one size fits all.” The level of risk associated with your industry, customers and location will be unique to your business, so coverage solutions are tailored to your needs. Euler Hermes Trade Credit Solutions include:

Traditional Credit Insurance

Corporate Advantage

Our most popular solution

Ensure your trade credit receivables are covered in both domestic and export markets with a Corporate Advantage policy. Corporate Advantage is Euler Hermes’ flagship solution that is designed to be easily customizable to meet the needs of your business regardless of size or industry. With this policy, you will be protected against your customers’ failure to pay trade debts due to insolvency or late payments. We will check the creditworthiness and financial stability of your customer portfolio against our database of 85 million businesses, carefully calculate limits to guide your decisions on how much risk to accept and keep you in control of your customer portfolio.

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Corporate Advantage Coverage Enhancements:

EZ Cover: For Euler Hermes Corporate Advantage customers that need the ability to make quick coverage decisions on frequent, smaller accounts, we offer our EZ Cover service. Get accounts receivable coverage for any customer not named in your Euler Hermes policy with a straightforward endorsement and easy access through our online policy portal. EZ Cover can help you confidently take advantage of a sales opportunity and with instant feedback, tap into the reach of Euler Hermes’ database of more than 85 million U.S. and Canada-based companies’ existing grades.
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CAP Suite of Products: With a Euler Hermes Corporate Advantage policy, our underwriters will always provide the most appropriate coverage limits for your trading partners based on the information we have available. In cases where the standard coverage falls short of the requested amount on your riskier customers, you may have additional options with our CAP suite of products. Our CAP and CAP+ products allow customers to purchase additional limited coverage on higher risk buyers so that you can safely take advantage of important sales opportunities.
Learn more about our CAP products

Non-Cancellable Credit Insurance

When you need protection from large unexpected losses and assurance that the protection will not be withdrawn, grow safely and strategically with Non-Cancellable Insurance. With these solutions, Euler Hermes commits to insure transactional risk up to a limit, and that limit is good for your policy year, even if your credit risk rises.

Excess of Loss

Protect against exceptional credit losses with our Excess of Loss solutions. Designed for large and multinational companies with strong and mature credit risk management, capable of absorbing a greater share of risk, this policy features non‑cancellable credit limits and country limits for 12 months.

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EH DUO

Combine the benefits of a traditional credit insurance policy, like access to company information and ongoing monitoring of your customers, with locked-in coverage for your most important buyers with EH DUO. This solution provides a hybrid option and is a good fit for larger companies with strong and mature credit risk management departments.

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International Trade Solutions

World Program

With a global team mirroring your geographic structure and business strategy, including emerging markets, our World Program insures you against the insolvency of a customer portfolio, delayed payment and even political risk. Central to our World Program is one Master Agreement framework, adaptable both centrally and locally. We can help you assess, evaluate and mitigate global risks.

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Excess of Loss (XoL)

With the ability to manage credit risk through tailor-made programs and access to a network of strategic risk underwriters located in 50 countries throughout the world, XoL customers can improve balance sheet efficiency and grow sales safely.

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Transactional Cover

Protect assets abroad, as well as import or export transactions, with Transactional Cover. This customized policy solution is designed to mitigate and manage contract interruption, non-payment, confiscation or political risks. Your Transactional Cover policy provides a non-cancellable limit ($100 million max) for up to eight years, offering reassurance of limited exposure and capital relief, flexibility and coverage for single or multiple countries.

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Energy Sector Risk Mitigation

EH Energy Risk Solutions

Gain market share while minimizing credit exposure. Our Energy Solutions offer commercial traders and risk managers in the energy sector safer sales growth, credit approval support, reduction in bad debt reserves, protection against high-volume risk and a greater return on investment.

Learn about EH Energy