For example, an engine manufacturer selling several engines worth $20,000 each could face significant trouble if customers default or delay payments. Accounts receivable insurance would also protect against these types of losses. What an accounts receivable insurance policy covers is only part of a complete risk strategy—automation complements insurance by helping prevent defaults before claims become necessary. This creates a robust risk management framework where insurance protects against unavoidable accounting losses while automation reduces their frequency and severity.

Commercial Credit Insurance

For example, a U.S. pharmaceutical company used this coverage to secure credit protection and deliver test kits on time for a government contract. When it comes to trade credit insurance, these five carriers rank among the top in the industry. Each brings unique strengths in coverage options, pricing structures, and global accessibility, making them valuable for businesses looking to protect their financial interests.

Political risk coverage

This includes situations where a customer fails to pay due to bankruptcy or insolvency. Accounts receivable insurance is usually obtained as an extension of commercial property insurance or a business owner’s policy (BOP). However, this endorsement may only cover record losses resulting from building or business property damage. To ensure coverage against a wider range of loss causes, a standalone accounts receivable insurance policy is Opening Entry recommended. That’s where accounts receivable insurance (also known as credit insurance) comes into play. It offers a safety net, protecting your business from potential losses tied to unpaid receivables.

Why do you need trade credit insurance? Benefits of accounts receivable insurance

This type of coverage can be used to cover a variety of risks, including non-payment, slow payment, late payment, bankruptcy, and fraud. This type of insurance protects you in the event that you can’t collect payment for reasons beyond your control. Any kind of company that provides goods/services ahead of payment can benefit from AR insurance. It lessens the risk of who and where you do business and ensures that you don’t lose profits. For wholesalers and distributors operating on slim profit accounts receivable insurance margins, even one missed payment can be devasting – especially when it comes to high-volume goods.

Medium Term Insurance provides protection on transactions and loans with terms longer than one year but normally up to five years (or sometimes longer). These policies give exporters and financial institutions a stronger ability to compete in foreign markets. Policies can cover commercial and political risk as well as single or ongoing sales transactions. The risk of non-payment in most cases falls to the company with outstanding invoices. Companies protect themselves against non-payment risks and maintain their balance sheets.

• AIG stepped in with a tailored program offering strong non-cancelable protection.
• This proactive approach improves the health of the balance sheet by reducing bad debt provisions.
• However, an endorsement may only cover accounts receivable record losses that occur from damage to buildings or business property.
• This is important because the loss of accounts receivable records may render a firm unable to collect money customers owe.
• Once you have signed up for the policy, your insurer covers a portion of the financial loss if a customer does not pay you.
• It covers nonpayment caused by insolvency, bankruptcy, or protracted default, helping businesses avoid heavy losses tied to unpaid invoices.

• Accounts receivable insurance solves that problem and can make the difference between having enough cash to continue operating or being forced to either take out a loan or go out of business.
• The results of the insurer’s credit risk assessment of a business’s customers can impact both coverage and limits.
• Beyond protection, trade credit insurance empowers businesses to extend credit to international customers with confidence, giving them a competitive edge in global markets.
• The insurer then compensates for the unpaid debt up to the set limit, although the customer’s obligation to pay remains.
• The specific coverage and costs of accounts receivable insurance can vary, but it generally helps businesses manage credit and make financial decisions with greater confidence.
• When you first apply for the accounts receivable insurance policy, you’ll get to choose which customers you’d like to insure against.

Alliant Trade Credit will review your unique requirements and processes to develop objectives and goals in alignment with your risk tolerance. With streamlined workflows that limit delays and process duplication, you can keep your various revenue streams running smoothly. In fact, you are likely going to pay less on your premium because you have your choice of multiple carriers, rather than being locked into one. After working together to elect the best policy at the most competitive price, we continue to work with and negotiate with the insurance carriers as your needs evolve. But there’s a whole world out there – and that is precisely why risk mitigation solutions have moved on.