Trade Credit Insurance
Tyler Vandeberghe, CPCU, Sales Leader
2020 has brought unprecedented challenges for most of the business community. A handful of companies had their best year ever, yet many were closed completely, and most suffered through the effects of the supply chain disruption. So in a world of uncertainty how do companies make sure they still get paid on their accounts receivables?
The answer is Trade Credit Insurance. This insurance is typically purchased by manufacturers, traders, and service providers to protect against non-payment. It’s actually very simple, Company A doesn’t pay Company B, and boom, Trade Credit Insurance kicks in for Company B (subject to terms and conditions).
In 2018, only 3% of US companies purchased Trade Credit Insurance. That means 97% of companies chose to self-insure their bad debts. Often we see companies trying to buy Trade Credit coverage when they have a credit problem or foresee a problem in the future. Doing so will lead to restrictions on which receivables are eligible to be insured and/or increased premiums. It’s suggested to purchase this coverage while business is good, so if something bad does happen, business owners aren’t trying to find coverage for something that is uninsurable.
According to Insurance Business Magazine, accounts receivables represent 40% of a company’s assets. Of that, 1 in 10 invoices becomes delinquent, which leads to a write off of bad debt. Trade Credit Insurance can help offset this bad debt in reimbursement from 75% to 95%. Policies are also very flexible, allowing a company to choose to cover their entire portfolio or just a few key accounts. Why tie up your capital just waiting for bad debt when you can purchase coverage and free up that money to invest or use for product growth?
For more info on Trade Credit Insurance please contact me at 989-996-0292.
Tyler Vandeberghe, Producer
Brown & Brown of Michigan, Inc.