If your business sells on credit terms, one late or failed payment can hurt. Credit insurance (also called trade credit insurance) protects you when a customer cannot or will not pay. The first question most finance directors ask is: what will it cost?
The honest answer depends on your business, but it is usually far less than people expect, often a small fraction of the bad debt it protects against. This guide explains typical UK premiums, what drives your price, and practical ways to keep it down.
How is credit insurance priced?
Credit insurance is normally priced as a percentage of your insured turnover, which is the credit sales you want covered over the next 12 months. Published UK guidance puts typical premiums at roughly 0.05% to 1.0% of insured turnover per year, with most businesses sitting towards the lower end of that range. As an illustration only, a business insuring £5m of credit sales at 0.2% would pay around £10,000 a year. Your actual quote will differ.
Insurers usually base cover on your estimated insurable turnover (EITO), which excludes VAT, non-credit sales, inter company sales and sales to certain bodies such as the government. Read more in our credit insurance FAQs.
What affects the cost of credit insurance?
Five factors do most of the work:
- Turnover. Insuring a higher sales volume generally lowers the percentage rate.
- Your sector. Industries with slower or less predictable payment, such as construction, tend to cost more than lower-risk sectors. Other specialist areas include recruitment, retail, food and transport and logistics.
- Your customers. A spread of well-rated buyers is cheaper to insure than a handful of large or financially weak ones.
- Your claims and bad debt history. A clean record helps.
- Export exposure. Selling into higher-risk or politically unstable markets can add to the price.
What type of policy do you need?
The structure you choose changes the price as well:
- Whole turnover policies cover all your credit sales and are the most common option.
- Named buyer (key account) policies cover only selected customers.
- Top-up policies sit above cover you already have.
- Single risk policies cover one transaction or customer, and are usually the most expensive per pound of cover.
Most policies run for 12 or 24 months, and none run for less than 12 months. Different insurers have different appetites, so it pays to compare the market. See our guide to the credit insurance underwriters we work with, including Allianz Trade, Atradius and Coface.
Is credit insurance worth the money?
The right comparison is not premium versus nothing, but premium versus the cost of a bad debt. Consider a business with a 10% net margin. To recover a £50,000 unpaid invoice, it would need to generate £500,000 of extra sales. Credit insurance turns that unpredictable hit into a known, budgeted cost.
There are other benefits beyond claims. Insurers monitor your customers’ financial health, so you get early warning of trouble (see our article on five warning signs a customer is facing insolvency). Many lenders also advance more against insured debts so that credit insurance can improve your funding position. Read how invoice finance and credit insurance work together, or explore our wider funding services. For a fuller picture of what you get, see understanding the benefits of credit insurance.
How to reduce your credit insurance premium
- Review your top debtors first. Knowing who you are exposed to helps you choose the right cover and negotiate. Our free review of your top 10 debtors is a good starting point, and we explain why in the importance of reviewing your top debtors.
- Insure the right turnover. Do not pay for sales that are excluded or do not need cover.
- Diversify your customer base where you can.
- Use a broker. An independent broker can approach several insurers, and the service is free to you, as insurers pay the broker commission.
- Keep your credit control tight. Good records can help you get better terms at renewal.
Don’t just compare prices: Check the cover
The cheapest policy is not always the best. Claims can be declined if conditions are missed, such as late reporting of overdue accounts. Read 3 reasons why your credit insurance claim may was not paid before you sign. As a guide, insolvency claims are typically paid within 30 days once paperwork is complete, while protracted default defaults claims are usually paid within around six months of the due date, though this varies by insurer.
If you also need to recover money already owed, our debt collection service can help.
See how it works in practice
We have helped businesses of all sizes protect their sales. Browse our case studies, such as a labour agency supplying the construction sector or a beverage supplier selling to wholesalers.
Frequently asked questions
Most quotes are a small percentage of your insured turnover, typically well under 1%. The exact rate depends on your sector, customers and claims history.
Many insurers set a minimum annual premium, which varies by provider. A broker can tell you what applies to your business size.
Yes, through a named buyer or single-risk policy, though single-risk cover is usually considered more expensive.
Yes. Call us for an indicative estimate, subject to full disclosure before an insurer agrees to terms.
Get an accurate quote
Every business is different, so the best way to find your price is to ask. Book a free consultation or get in touch with our team and we will compare the market for you at no cost.
