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Is Trade Credit Insurance Right Your Company?

Can my company insure its accounts receivable?

The following criteria apply:

  • Only sales to another company (B2B) with open terms are insurable.
  • Sales payable by cash and credit card are not insurable.
What is trade credit insurance?

A trade credit insurance policy is a 12-month contract that covers the risks associated with your customers’ late payments, non-payment and bankruptcies. With credit insurance, you can improve your cash flow, make better credit decisions and gain a competitive edge. You’ll enjoy peace of mind, allowing you to concentrate on growing your business knowing that your receivables are protected against the unexpected.

When can I submit a claim?

You can submit a claim as soon as you know that your customer will not pay an invoice.

Your claim filing deadline is between 180 and 270 days from the invoice date, depending on your policy.

How long does it take for a claim to be paid?

Here are the usual timeframes, depending on the claim type:

  1. Slow-Pay (Protracted Default): It can take up to 120 days for a claim to be indemnified.
  2. Bankruptcy: It can take up to 30 days from the moment the trustee validates the outstanding invoices for a claim to be indemnified.
Do I need to insure all my customers?

Non. Avec Invoice Cover, vous pouvez assurer un seul client, quelques clients ou tous vos clients. Si vous préférez, vous pouvez assurer un seul projet ou même un seul bon de commande.

What can I do if my customer cannot be insured?

Invoice Cover can help you get insurance for your high-risk customers. We source coverage and A/R Puts on the most challenging customers.

What are the fees to work with Invoice Cover?

There are no added costs to benefit from our expertise. Our team will ensure you receive the best value for your insurance products.

What are the benefits of working with Invoice Cover?

Founded in 2019, Invoice Cover is an insurance brokerage specialized in domestic and export trade credit insurance products. Invoice Cover works with the best insurance providers to design the most beneficial and complete program for their customers. After an application is completed, Invoice Cover can then analyze the entire market to determine which trade credit insurance solutions are best suited for your needs. Teaming-up with us means you’ll have an ally on your side during negotiations and if you need to file a claim. Leverage Invoice Cover’s resources and keep on winning.

I have a trade credit insurance policy with an insurance provider, why should I choose Invoice Cover?
  • We take care of everything for you.
  • We negotiate the best combination in terms of cost and coverage.
  • We assist you when claims arise.
  • We review your coverage and provide advice in real time.
  • We stay informed about the changes impacting the trade credit and invoice insurance industry and can provide valuable advice.

Trade Credit Policy Questions

What is co-insurance?
  • All trade credit insurance programs include co-insurance terms. 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 insurance provider would indemnify 90% of the amount by applying a 10% co-insurance.
How is a settlement calculated when there is a deductible?
  • Not all trade credit policies have deductibles.
  • If you file a $100,000 claim and have a $15,000 deductible and 10% co-insurance, your payout would be $76,500 ($100,000 – $15,000 [deductible] x 90% [10% co-insurance] = $76,500).
What is a discretionary credit limit (DCL)?

Your trade credit insurance policy could include a discretionary credit limit endorsement. This type of coverage allows you to evaluate the credit worthiness of a customer using determined qualifying methods. There are two ways to insure your receivables:

  • You can name a specific buyer by asking the insurance provider for a coverage amount.
  • You can use your own payment experience with a buyer to qualify and justify their coverage yourself (DCL).
What is work in progress coverage?

Also known as WIP, work in progress is an extension of your trade credit insurance program that covers the value of the materials and labour of unfinished projects. A settlement for work in progress can be paid out when your customer becomes insolvent and you’re still in the production stage. The insurance provider could indemnify up to 90% of the cost associated with a purchase order (a deductible may apply).

My customer’s invoices are past due, can I continue to ship goods to them?

When your customer is 60 days past due, they are considered in default and their account must be put on hold until the late invoices are paid. If you keep on shipping goods when your customer is in default, all new invoices will not be insured.

If I file a claim, will my insurance premium automatically increase next year?
  • No, trade credit insurance providers can use debt collection processes to recover funds and lower the losses. During the policy renewal, the underwriter will calculate your policy loss ratio and determine the premium for the following policy period.
  • To calculate the loss ratio, we need to divide the claims amount paid by the insurer by the premium paid by the insured. If the percentage is greater than 100%, it means that the indemnity paid out by the insurer during a given policy period is greater than the premium received.
Invoice Cover is a commercial-line damage insurance brokerage. Through its brokers, Invoice Cover is registered and licensed in the province of Quebec.

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