Frequently Asked Questions
Our frequently asked questions should cover the most common questions that we are asked, however if you still require assistance our friendly team are available to answer any of your questions you may have.
Trade credit insurance protects your business against the failure of a customer to pay their invoices that are owed to you. This could be due to insolvency or administration or it could be that they are still trading but wont or cant pay you within a certain timeframe.
Any business that trades on open account terms is susceptible to supply chain instability. We have clients in the hundreds of millions of turnover down to SME’s and startups looking to secure their futures.
When we set your policy up, we ask you for your estimated insurable turnover (EITO) for the next 12 months. This will exclude VAT, non credit sales, inter company sales and sales to uninsurable entities like Government bodies. This figure will form the basis of what can be insured (subject to the credit limits agreed by the insurer)
Credit insurance pricing is driven by a few key factors. The turnover of your business, the sector(s) that you supply to and your history of bad debts. If you a ’quick ballpark’ of pricing, we can usually give you this over the phone if you provide the above to us. It will of course, be subject to full material disclosure prior to agreement with an insurer.
Credit insurance policies usually run for 12 or 24 month periods unless they need to coincide with a company year end or exceptional event. In that scenario, an insurer may agree to a period longer than 12 months, but shorter than 24 months. No policies are less than a 12 month commitment.
Your own policy is absolutely that. Yours. You are not sharing capacity on a particular debtor with all of the funders other clients. You will be working with a specialist broker who will approach the whole market of insurers to get you the best combination of cost and cover, to suit your specific needs. Your pricing will be based on your estimated insurable turn over (EITO) i.e the net figure, whereas with a funder they charge on the gross figure. You will not have access to bespoke features such as top up cover, binding contracts cover or cover for retention through a funder’s policy either.
PD occurs when the debtor cannot or will not pay. Most insurers would expect you to have either passed to their in house debt collection team, or used an external debt collection/legal team to try and recover the funds before paying a PD claim.
Every policy will have a maximum liability (ML) noted on it. The ML is the maximum value of claims that the insurer will pay to you in the policy period.
Whole turnover (WTO) policies are the most common policies in the market and get you more ’bang for your buck’. However, other structures are available, such as named buyer policies, top up policies and single risk policies. Your broker should disccuss the pros and cons of each, as the costs for viability of single risk for example are usually prohibitive.
A Discretionary Limit (DL) is where the insurer effectively lets you underwrite your own limit, up to a set level with a few caveats. This would usually be based around you having solid trading experience with a debtor or a credit report to justify why you allowed them to trade on credit terms.
There are no monthly or weekly uploads of statements or aged debtor reports. But the insurers will expect you to alert them when there is an adverse event (such as a bounced check or a request for a debt rescheduling/repayment plan). Under most policies you will have a maximum extension period (MEP) or on-stop period. This is a period of days past the due date where you would be expected to try and recoup payment from your debtor. If you get to the end of your MEP or on-stop period, you would need to put the account on stop. You then have a further period of time – usually 14-30 days, in which you would need to report this to the insurer. Failure to do so could result in a claim being denied. You also need to be diligent in which trading entity you are dealing with. If you apply for cover on the wrong entity, and the worst was to happen, the insurer will likely not pay a claim as it is your responsibility to ensure the correct principal to contract is covered.
Claims paperwork will involve a claim form (which we will help to complete). The insurer will also request copies of statements, invoices/POD’s, Delivery notes, timesheets, applications, pay-less notices, and prior trading history. If using external debt collection, they will need to see what was done to try and recover the funds. We may also need to provide a copy of signed T’s and C’s and/or contracts. Once the paperwork is all complete, insurers pay the claim within 30 days for insolvency claims. For PD claims, these are usually paid within 6 months of the due date although this can vary between insurer.
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