Most businesses involved in imports or exports are not fully insured if something happens during the transaction. While these eventualities are not anticipated, businesses should consider safeguarding their bottom line if their customers fail to pay.
Usually, business insurance won’t protect against the nonpayment of your accounts receivable. To protect your account receivables, you’ll need a specific coverage type known as export or trade credit insurance.
Are you curious about export insurance and whether it is necessary for your business? Read on to find out more:
Export Insurance is Different from Marine and Cargo coverage
If you are in the export and import business and have marine or cargo insurance, you might wonder whether you require trade credit insurance. After all, aren’t you protected against most risks on a vessel carrying your merchandise?
Marine insurance provides coverage for the damage and loss of cargo and ships, while cargo insurance offers complete protection against any damage or commodity loss that can occur during shipment.
Ensuring your goods are delivered safely is a single aspect of the picture. Have you thought about what would happen if they arrive at the right place and you get notified, but your customer fails to pay? It may take days, weeks or even months to realise that you won’t receive payment.
Suppose political unrest or corporate bankruptcy has impeded your customer’s capacity to make the payment. In that case, you will have no choice but to forfeit the sales. You can luckily retrieve your shipment, which is not guaranteed.
Without export insurance, you don’t have many options and will likely take the loss. However, you can submit a claim to your insurance provider and get compensated if you are insured.
Export Insurance Safeguards your Receivables from Default
Purchasing export credit insurance is an excellent way to protect yourself from potential risks when offering goods and services on credit. Whether you’re extending a small line of credit, dealing with a newer business, or working with a reputable organisation in a politically disruptive area, it’s important to have protection in place.
If you are looking to safeguard your accounts receivable, an export insurance policy is a great way to ensure that one client defaulting on their debt does not put your business in jeopardy. The coverage will kick in if you don’t receive payment from a client due to bankruptcy, protracted default, or financial insolvency of their organisation.
Another essential component of international trade insurance is political risk insurance. This coverage, which may be included in the export policy, will protect your business if disruptions arising from political events such as social upheaval, currency issues, or expropriation can cause the loss of a transaction.
What is the cost of export credit insurance? Various factors influence the cost of your insurance. When insuring a huge buyers’ portfolio, the insurance company typically pays out a specific percentage of any unpaid invoice. For single transactions, you’re likely to receive comparable rates as well.
Generally, businesses in the export trade should ensure they’re adequately insured – it’s especially beneficial to those who often allow their customers to get goods on credit or deal with new customers who potentially pose a risk of non-payment.
Don’t Wait Any Longer – Obtain Your Export Insurance Policy
Niche Trade Credit will offer the ideal export insurance solutions to suit your business goals. With a dedication to excellent service, competitive rates, and a proven success record with multiple Australian companies, we’d be delighted to answer any queries about our policies and services. Don’t hesitate to get in touch today!
*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.
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