What Affects Your Trade Credit Insurance Premium Rate

If you want a trade credit insurance policy to protect your accounts receivables from defaults, you might wonder how much you should expect to pay. Niche Trade Credit is here to help. We’ve compiled some factors that could affect your insurance premium rates.

What Affects Your Trade Credit Insurance Premium

1. The Country in Which You’re Operating the Business

Your insurance premiums may be higher or lower depending on the country with which you are doing business. If you export your goods to Canada or USA, you are likely to pay less than one who exports to developing countries.

As part of their risk management strategy, businesses operating in developing countries may need to purchase political risk insurance coverage. This is a separate policy designed to cover political risks such as violence, asset seizure, and breach of contract.

2. Your Customers’ Creditworthiness

If you have a sound internal credit risk management system that only allows you to extend credit to customers who pay on time, you will likely pay less for your trade credit insurance. On the other hand, if you work with a business with a history of bad debt, you will pay more insurance premiums. In some cases, you may be unable to insure risky debts, and the insurance companies may refuse to provide export credit insurance coverage.

3. Percentage of Compensation

If a customer fails to pay for goods and services, your insurance provider will offer compensation based on a percentage. This could range between 90-100% of the transaction value. However, if you want low insurance premium rates, you could insure only 70-85% of the transaction value.

This way, you may incur low insurance premiums, ultimately enhancing your cash flow. Your investment will still be protected if you receive enough compensation to keep your business afloat.

4. The Value of the Transaction

It is costly to insure accounts receivable with higher transaction amounts since the insurance company is likely to incur significant losses if your customer defaults on the debt.

How Much Will Your Trade Credit Insurance Cost?

The cost of your trade credit insurance policy will vary depending on the annual revenue to be protected, your bad debt history, existing internal credit management systems, your bad debt history, and many more. The best way to estimate the cost of your trade credit insurance is to conduct due diligence.

At Niche Trade credit, we are ready to provide the relevant information you need upfront, so you can know what to expect.

How Niche Trade Credit Can Help

The above is just a highlight of the factors determining how much you can expect to pay for your trade credit insurance policy. At Niche Tade Credit, our insurance experts are more than ready to help you achieve the peace of mind you deserve while carrying out your business operations. Contact us if you’d like to look at a sample contract, request a quote, or discover more about our credit insurance services.

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