Is Trade Credit Insurance Right for Me?Does my company qualify to insure our receivables?
There are a few qualifiers:
- Only B2B Sales on open terms are insurable
- Cash and credit card sales are not insurable
Trade credit insurance is a 12-month contract that covers the risk that a customer slow pays or becomes bankrupt leaving you with unpaid invoices and a bad debt.
You can submit a claim as soon as you know that your customer will not pay the invoice.
Your claim filling deadline is between 180 and 270 days from invoice date depending on your policy.
There are 2 types of claims:
- Slow-Pay (Protracted Default): Claim takes up to 120 days to be indemnified.
- Bankruptcy: Claim takes up to 30 days from the moment the trustee validates the outstanding invoices.
No, with Invoice Cover you can insure one, a few or all your customers. You can insure a single project or even a single purchase order.
Invoice Cover has an appetite for high risk. We source coverage and A/R Puts on the most challenging of customers.
There is no added cost to have our experience and resources in your corner. Instead of standing alone when working on a direct basis with the carrier, align yourself with the resources of Invoice Cover to ensure you receive the maximum value for your investment.
Founded in 2019, Invoice Cover is the premier specialist broker for domestic and export trade credit insurance products in Canada. Invoice Cover works with all of the carriers on your behalf in order to design the most cost effective and comprehensive program available. With one application, we can shop the entire market for you and help you sort through the pros and cons to find the ideal custom-tailored trade credit insurance solution for your needs.
- We take care of everything for you.
- We negotiate the best combination of cost and cover.
- We provide assistance when claims arise.
- We review your coverage and provide advice in real-time.
- We stay informed and knowledgeable about the changes taking place within the trade credit industry in order to provide valuable advice.
Trade Credit Policy QuestionsWhat is co-insurance?
- All trade credit insurance programs have a co-insurance. Co-insurance is the amount, generally expressed as a fixed percentage an insured must pay against a claim after the deductible is applied. The co-insurance is usually set at 10%.
- On a $100,000 claim, the carrier will indemnify 90% by applying a 10% co-insurance.
- Think of co-insurance as having skin in the game.
Not all trade credit policies have deductibles.
If you have a $15,000 deductible and 10% co-insurance on a $100,000 claim, your payout will be $100,000 – $15,000 (deductible) x 90% (10% co-insurance) = $76,500.
There are 2 ways to insure your receivables:
- Name the buyer by asking the insurance carrier for coverage.
- Using your payment experience to justify the coverage directly on your book.
Also known as WIP, work in progress is an extension of your trade credit insurance program covering the value of the materials and labor for unfinished projects. The WIP is paid out when your customer becomes insolvent and you’re still in the production stage. The insurance carrier will indemnify up to 90% of the cost associated with a purchase order.
When your customer is 60 days past due he is considered in a state of default and you have to put the account on hold until the late invoices are paid. If you keep on shipping when the customer is in a state of default, all new invoices will not be insured.
No, unlike other insurance policies, trade credit insurance carriers have the capacity to collect on unpaid invoices and directly lower your loss. At the end of the policy period, the underwriter will calculate your policy loss ratio and determine the appropriate increase or reduction to be taken.
The loss ratio is a simple division between what has been paid and lost by a policyholder. A percentage above 100% means the carrier paid out more on claims during the year than premiums collected.