Trade credit insurance and export insurance are excellent ways of protecting international traders from the buyer’s risk of non-payment. They help assure traders that they will receive their money if a buyer defaults on their debt.
If you are into international trade, you are probably aware that proper insurance coverage is essential for credit management. For instance, if you supply goods or deliver services to a foreign company that defaults on the payment, your account receivables and cash flow can be significantly affected.
Export insurance and trade credit insurance can reimburse your business if a client or customer fails to pay their debt due to commercial threats such as slow payment and bankruptcy or political risks such as terrorism and revolution. Deciding on the appropriate type of insurance is essential. Let’s find out more!
Difference between Trade Credit Insurance & Export Insurance
Export insurance and trade credit insurance are terms commonly used interchangeably. Risk insurers use them to describe one thing. Although it might seem daunting, these terms describe the same product; the only difference occurs because of regional differences. Many risk insurers from different regions offer this type of insurance coverage, thus the term variation.
In a nutshell, export insurance and trade credit insurance operate the same way. Both aim to safeguard your business’ capital and maintain your cash flow. If your account receivables are insured and debtors fail to pay, your insurer will use a debt collection service to recover the money.
The cost of your export insurance will depend on your risk to the insurance company. Risk insurers typically check several factors when determining business risk. The factors may include your debtor’s creditworthiness, your industry, trade volumes, and your existing repayment or credit terms.
Reasons to Invest in Export Insurance
- Grow Your Customer Base- Export insurance allows you to sell more products and services to existing customers and find new customers who may have otherwise seemed too risky. Besides, you can set appropriate credit terms without worrying about payment default.
- Minimising Bad Debt Reserves- Export insurance can help free up your business capital to use elsewhere. Additionally, unlike bad debt reserves, where a business only sets aside money to cover bad debts, export insurance premiums are tax-deductible.
- Obtaining Better Financing Terms- Banks and other financial institutions are more likely to provide capital to companies offering export insurance.
- Non-payment Risk Protection- Export insurance pays out a significant percentage of the money owed if a buyer fails to pay a debt due to protracted default or insolvency.
Get Help from Niche Trade Credit Today
Niche Trade Credit has the resources to help you meet all your debt management needs. We will provide the answers to the questions you may have about export credit insurance. We will also offer the necessary resources to insure your business against bad debt. Call us at 02 9416 0670 for more information about our business protection services.
*DISCLAIMER: No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publications sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.
Top4