If your customer fails to pay, trade credit insurance safeguards your business. In many instances, credit insurers may cover up to 90% of the debt.

Credit insurance coverage usually applies to customer bankruptcy and political risks, although it can extend to many other causes of non-payment as agreed in the policy terms.

How trade credit insurance works?

Credit insurance provides a safety net by guaranteeing that your insurer will compensate you in case your customer fails to pay. For example, if your customer declares bankruptcy after you have shipped goods to them but before they have paid you, credit insurance will cover your losses.

Different insurers have different processes for applying and managing trade credit insurance policies. At FreightAmigo, we work with the Hong Kong Export Credit Insurance Corporation (HKECIC) to provide us with a credit insurance policy that can cover 90% of debts. Most insurers, including HKECIC, will start by assessing the risk of your customer and assigning them a risk rating. This rating determines the level of credit coverage your insurer is willing to provide and the terms of your policy.

If your customer is unable to pay, it is best to try and recover the money owed to you before making a claim on your credit insurance policy. In some cases, your customer may just need extra time or a payment plan.

If you are unable to recover the money owed, your insurer should pay out according to the terms of your policy. Whether through debt collection or insurance, you can expect to receive most or all of your money back.

What does credit insurance cover?

Credit insurance provides comprehensive protection for your business by covering all transactions made with a specific customer over the course of a year. This ensures that your cash flow is protected and helps you avoid losses due to non-payment. While credit insurance is not typically used for single transactions, HKECIC Special Products can be customized to meet the needs of individual projects.

Credit insurance is designed to mitigate the risks associated with customer payment defaults, including events that may affect their ability to pay, such as bankruptcy, war, terrorism, changes to import and export regulations, and other unexpected circumstances. At HKECIC, credit insurance policies are available to businesses of all sizes, from small and medium-sized enterprises (SMEs) to large corporations, whether they trade domestically or internationally.

Benifits of a policy provided by a credit insurer

• Trade insurance policies can provide numerous benefits beyond peace of mind.
• Access to extensive trading information on millions of companies worldwide can assist in conducting due diligence when assessing creditworthiness of potential trading partners.
• Credit insurance can help businesses meet management board requirements for credit control processes.
• A reliable credit insurance policy can build confidence with banks and other lending institutions to facilitate access to finance.