Yes. Trade credit insurance exists specifically to pay you when a customer that owes you money cannot pay, whether that customer goes bankrupt or simply stops paying without ever going under.
Why it matters: Most businesses carrying real nonpayment risk have never actually priced the coverage that exists for it.
What Actually Triggers a Payout
A policy responds to one of two distinct events, and knowing which one applies changes how fast you get paid.
- Insolvency is the most straightforward trigger. Once a buyer enters a formal bankruptcy or insolvency process, normal payment obligations stop and the claim clock starts, and insurers typically pay the claim within about a month of that event.
- Protracted default covers a buyer who simply will not or cannot pay without ever going insolvent, though it requires defined collection steps first and carries its own waiting period, commonly up to six months, before the claim pays.
How Much of the Invoice You Get Back
Coverage is a percentage of the outstanding debt, not a guarantee of the full invoice.
- The indemnity percentage typically runs 75% to 95% of the covered amount, set by the specific policy and coverage type you choose.
- Insured receivables are often viewed more favorably by lenders, since part of the credit risk on those specific buyers has already been transferred to an insurer, though the actual effect on your borrowing base or advance rate depends on your lender and your credit facility’s terms.
- The remaining exposure, and any invoice still under a genuine dispute, stays with you. The policy transfers risk. It does not replace your own credit management.
What It Costs, and Why It Often Pays for Itself
Premium is priced as a percentage of the sales you choose to insure, not as a flat fee.
- The rate depends on your buyers’ credit quality, how concentrated your receivables are in a few accounts, your industry, and your claims history.
- Securitas’s own experience with clients puts a typical premium at a fraction of one percent of covered sales, well below what a single uninsured bad debt can cost a business.
- A broker who places your policy with multiple carriers, rather than approaching one insurer directly, is generally the fastest way to see the real range for your own book, at no added cost to you.
Who Actually Buys This
Any business that sells on open credit terms carries this exposure, regardless of size.
- Coverage runs from small and mid-sized businesses through Fortune 1000 companies and multinationals, on either a whole-turnover basis covering every buyer or a single-buyer basis covering one concentrated risk.
- Banks and other lenders buy a related version of this coverage to protect the receivables they finance, a different policy structure than the one a seller buys directly. Our lender insurance programs cover that side of it.
Reading the Coverage
The table below separates the two ways a buyer can stop paying you from the single question that decides how fast you see money.
| What Happened | What It Means | Typical Claim Timing |
|---|---|---|
| Buyer becomes insolvent | Formal bankruptcy or insolvency process begins | Often paid within about a month of the event |
| Buyer won’t or can’t pay, but isn’t insolvent | Protracted default: payment simply stops | Defined collection steps, then a waiting period of up to six months |
| Covered | Not Covered |
|---|---|
| Unpaid invoices tied to goods actually delivered or services actually performed | Amounts with no underlying delivered transaction |
| Insolvency and protracted default on a covered buyer, up to the approved limit | Invoices still under a genuine quality or contract dispute, until resolved |
What to do now
Our trade credit insurance overview and free guide walk through how a policy is actually structured once you decide to move forward.
- Pull your current accounts receivable aging and flag which customers represent the largest share of your outstanding balance.
- Decide whether your risk is spread across many buyers, which points toward whole-turnover cover, or concentrated in one or two, which points toward single-buyer cover.
- Contact Securitas Global Risk Solutions for a quote placed across multiple carriers, at no added cost to you over going direct.
Disclaimer:
This blog post is meant to be informative and provide helpful tips and insights into credit insurance policies. It is not meant to supersede any policy requirements. Please consult your credit insurance policy for all requirements including claim filing deadlines and required documentation.
Since 2004, Securitas Global Risk Solutions, LLC has helped clients develop trade credit transfer solutions. As an independent brokerage, Securitas is focused on developing comprehensive solutions that meet client needs, ensuring a complete understanding of policy wording and delivering excellent responsive service. If you want to understand how trade credit insurance can protect your business, contact Securitas Global Risk Solutions to speak with a specialist.
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