Credit insurance is your safety net against unpaid invoices. It protects suppliers from financial risks like customer insolvency, late payments, or defaults, covering up to 90%–95% of unpaid debts. Here’s why it matters:
- Protects Cash Flow: Prevents disruptions caused by unpaid invoices, ensuring steady operations.
- Supports Growth: Enables safe expansion into new markets and allows suppliers to offer better credit terms.
- Improves Financing Options: Insured receivables are more attractive to lenders, leading to better credit terms.
- Affordable Coverage: Premiums typically range from 0.1% to 0.5% of covered sales.
With rising bankruptcies and longer payment delays, credit insurance is a practical tool to reduce risk and maintain stability. Platforms like CreditInsurance.com can guide you in choosing the right coverage tailored to your business needs.
What is Trade Credit Insurance? | Credit Insurance explained in 5 minutes
Key Benefits of Credit Insurance for Suppliers
Credit insurance provides suppliers with a safety net that not only guards against financial risks but also helps businesses grow with greater confidence. By protecting against potential losses, it supports smarter decision-making and financial stability, making it an essential tool for suppliers navigating uncertain markets.
Protection from Non-Payment Risks
One of the biggest challenges suppliers face is the risk of non-payment, often caused by customer bankruptcy or insolvency. Credit insurance typically covers 90% to 95% of unpaid invoices when customers default due to commercial risks.
Take this example: A U.S. food importer extended $500,000 in credit to a European distributor, which later filed for bankruptcy. Thanks to credit insurance, 90% of the loss was covered, shielding the importer from severe financial harm.
Given that 25% of businesses could fail because of unpaid invoices, credit insurance offers a cost-effective safeguard. With premiums ranging from just 0.1% to 0.5% of covered sales, it’s a smart investment for minimizing risk. This protection not only stabilizes cash flow but also creates a safer path for market expansion.
Safe Sales Growth
Credit insurance does more than protect against risks – it enables suppliers to grow by extending credit to new customers and exploring unfamiliar markets with less fear of financial setbacks. Gary Lorimer of Aon Credit Solutions highlights this, describing credit insurance as "opportunity protection" rather than just risk coverage.
For example, a U.S. food distributor aiming to grow its presence in Latin America used credit insurance to safely expand exports while managing non-payment risks. This kind of coverage also allows suppliers to offer more attractive payment terms, like extended credit periods, which can be a competitive advantage when chasing large contracts or building stronger customer relationships.
As Bohdan Sosiak, Managing Partner at Risk Protection International, explains:
"In addition to these benefits, Credit Insurance enables market expansion into higher risk countries, secures presale approvals, and creates opportunities for aggressive sales to expand market share."
With this kind of support, suppliers can confidently pursue larger deals and enter higher-risk markets, knowing they’re protected against potential losses.
Better Cash Flow and Financing Options
Credit insurance also strengthens a supplier’s financial position by making receivables more secure and attractive to lenders. For instance, a wholesaler with insured accounts receivable was able to secure a $1 million credit line at a lower interest rate, improving both liquidity and operations. Lenders often view insured receivables as less risky, which translates into better financing terms.
Additionally, credit insurance reduces the need for setting aside large reserves for bad debts, freeing up cash for other priorities like expanding inventory or funding growth initiatives. It also helps improve cash flow by reducing collection delays – an issue faced by nearly one-third of small business owners who wait over 30 days for payments. Reliable cash flow enhances operational stability and builds trust with customers and partners.
Banks, too, value credit insurance. Sergio Vignone, a Credit Manager, explains:
"As traders, we obtain working capital from our bank and then we receive our money when the customer pays. The banks themselves make credit insurance a condition for access to trade finance."
How Credit Insurance Works in the United States
In the U.S., obtaining credit insurance begins with a detailed evaluation of risk, which helps determine the scope of coverage and the associated premium costs.
Steps to Get Credit Insurance
The journey starts with a thorough risk assessment. Here, insurance providers examine both your business and your customers’ creditworthiness. This analysis is crucial in determining the level of coverage you’ll receive and how much you’ll pay for it.
Choosing the Right Provider and Broker
Partnering with a specialized insurance broker is a smart way to explore various policy options at competitive rates. In the U.S., you can find credit insurance through private commercial insurers or government-backed options like the Export-Import Bank of the United States (EXIM). A seasoned broker can guide you through the process, offering access to multiple insurers and helping you negotiate better terms.
How Premiums Are Calculated
Premiums are typically about 0.25 cents per dollar of covered sales. However, the actual cost depends on several factors, including your industry, annual revenue, history with bad debts, internal credit practices, and your customers’ financial reliability. Multi-buyer policies usually cost less than 1% of insured sales, while single-buyer policies are priced higher due to the added risk of covering just one customer. For EXIM policies, you can use their online fee calculators to estimate your premiums and exposure fees.
Getting Quotes from Providers
To get accurate quotes, you’ll need to provide detailed information about your operations, customer base, and sales volume. Insurers will evaluate factors such as coverage limits, underwriting processes, claims procedures, and customer service quality before offering a quote. Once your policy is active, managing it effectively ensures you stay protected.
Policy Management and Claims Process
After securing coverage, understanding how to manage your policy and handle claims is essential for maximizing its benefits.
Timing Requirements for Claims
Credit insurance typically covers two main situations: slow payments (protracted default) and customer insolvency. Each has specific deadlines:
- Protracted default claims: Must be filed within 180 days from the invoice date.
- Insolvency claims: Must be filed within 10–20 days of receiving notice of the customer’s bankruptcy.
Missing these deadlines can result in a denied claim. However, if your customer is making partial payments, you might request a filing extension, giving them more time to pay while preserving your right to file within the required window.
Required Documentation for Claims
To successfully file a claim, you’ll need to provide consistent and thorough documentation that clearly shows the sequence of events leading to non-payment:
- Purchase orders or contracts proving the customer ordered your goods or services
- Invoices confirming accurate billing
- Bills of lading and proof of delivery showing the order was fulfilled
- Aging reports indicating overdue payments
- Records of collection efforts to demonstrate attempts to recover the debt
This detailed paperwork helps adjusters verify that your claim is legitimate and aligns with the policy terms.
Effective Policy Management
Credit insurance policies operate on a customer-specific credit limit system. Before entering agreements with new customers, you must request and secure a coverage limit from your insurer. Policies also include an overdue period that begins once an invoice is past due. Keeping track of these periods – and automating the process where possible – can help you meet filing deadlines and follow proper collection procedures.
Kirk Elken, Co-founder of Securitas Global Risk Solutions, sheds light on the claim extension process:
"The insured might be able to request a claim filing extension if the debtor is making payments, providing the debtor more time to pay. The claim filing extension still has to be requested in the claim filing window. If approved, this allows the insured to still file a claim if the debtor stops making payments or defaults on payment plan."
When a claim is approved, you’ll assign your rights to the unpaid receivables to the insurer, who will then take over the collection efforts.
This structured approach not only protects your receivables but also strengthens supplier relationships by ensuring steady cash flow and minimizing risks. Knowing these processes and adhering to the requirements can help you unlock the full potential of your credit insurance while avoiding pitfalls that could jeopardize your coverage.
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Using Credit Insurance to Build Stronger Supplier Relationships
Expanding on earlier discussions about stabilizing cash flow and reducing risks, let’s explore how credit insurance can help strengthen supplier relationships. By providing financial security, credit insurance allows suppliers to focus on fostering long-term partnerships rather than worrying about payment uncertainties. This protection not only safeguards cash flow but also enables suppliers to offer more appealing terms, as explained below.
Negotiating Better Payment Terms
Credit insurance gives you the confidence to extend more attractive payment terms without putting your cash flow at risk. Instead of requiring immediate payment or relying on letters of credit, you can offer 30-, 60-, or even 90-day payment terms, making your business more appealing to buyers.
With relatively low premium costs, suppliers can provide competitive payment terms while staying financially secure. In the event of non-payment, credit insurance may cover up to 90% of the invoice value.
"A strong analysis of your client’s situation, along with the relevant coverage mechanisms, can help you find the sweet spot."
– Allianz Trade US
This flexibility is especially useful when working with large retailers – companies like Walmart, for instance, often negotiate tough payment terms.
To make the most of credit insurance in negotiations, consider these practical steps:
- Offer flexible payment terms with early payment discounts, while clearly outlining billing schedules and late fee penalties.
- Set appropriate credit limits based on the coverage provided by your credit insurance.
By implementing these strategies, your team can shift its focus from chasing overdue payments to building stronger customer relationships and driving sales. Additionally, credit insurance providers can evaluate your customers and help you set suitable credit limits.
Once better payment terms are in place, credit insurance can further be integrated into a broader risk management strategy.
Adding Credit Insurance to Risk Management
When credit insurance is woven into your overall business strategy, it becomes a valuable tool for customer acquisition, financial planning, and managing risks. It enables you to confidently expand your customer base and take calculated risks with new or less-established clients, opening doors to opportunities you might have previously avoided.
This increased willingness to take on risk can lead to competitive advantages, such as offering higher credit exposures and more generous credit lines to clients. To maximize these benefits:
- Align credit limits with your growth goals by working with your insurer to adjust coverage as relationships evolve.
- Use credit assessments as a way to strengthen relationships by sharing insights that help customers better understand their own credit profiles.
- Coordinate with your finance team to ensure insured receivables support improved borrowing terms and more accurate cash flow forecasting.
Credit insurance also serves as a bridge for communication with customers. By offering flexible terms and showing a commitment to their success, you reinforce trust and collaboration – especially during challenging times.
Once credit insurance is part of your risk management framework, it’s essential to communicate its benefits effectively to all stakeholders.
Explaining Credit Insurance Benefits
To effectively convey the value of credit insurance, focus on how it creates mutual benefits. Explain to both customers and internal teams that credit insurance doesn’t just protect your business – it allows you to be a more dependable and supportive partner.
For instance, showing how credit insurance enables you to offer flexible payment terms and maintain a steady supply – even during economic uncertainty – can position your business as both reliable and financially savvy.
Key points to highlight for different audiences include:
- For customers: Credit insurance allows you to offer flexible payment terms, higher credit limits, and a consistent supply, helping you seize opportunities where others might hesitate.
- For internal teams: Emphasize that credit insurance reduces time spent on collections, supports sales growth, and ensures predictable cash flow.
- For lenders and investors: Demonstrate how insured receivables improve financing options and lower overall business risks. As Bohdan Sosiak, Managing Partner at Risk Protection International, notes:
"Lenders tend to finance buyers up to a percentage of the insured value. Working with a specialist broker helps obtain your best policy for optimal buyer coverage, maximizing financing, and expanding your global footprint."
– Bohdan Sosiak, Managing Partner, Risk Protection International
Starting these conversations early with key customers and suppliers ensures everyone works together toward mutually beneficial solutions, keeping business operations smooth. Credit insurance also provides growth opportunities during tough economic times – such as trade disruptions or tariff changes – by helping you maintain relationships and explore new markets.
For more resources, CreditInsurance.com offers extensive educational materials to help you clearly articulate the benefits of credit insurance. These resources explain how credit insurance not only protects against financial risks but also supports business growth by enabling higher credit lines and better financing options.
Conclusion and Key Takeaways
In today’s unpredictable economy, credit insurance has become a game-changer for suppliers, helping them navigate financial risks and maintain stability. With business bankruptcies in the United States rising by 23.5% in 2025 compared to the previous year, the demand for financial safeguards has intensified.
The primary strength of credit insurance lies in its ability to reduce risk. By covering up to 90% of unpaid invoices, it ensures suppliers can sustain their cash flow – even when defaults and insolvencies contribute to 25% of corporate bankruptcies.
"Credit insurance is more than just protection against non-payment – it’s a powerful risk management tool."
– AU Group
Beyond risk reduction, credit insurance opens doors to growth opportunities. It allows suppliers to offer flexible payment terms, confidently explore new markets, and build stronger relationships with buyers. What might seem like a safety net also becomes a catalyst for expansion.
With its relatively low premiums and tax-deductible costs, credit insurance provides an affordable alternative to maintaining large bad-debt reserves. It also alleviates the burden of debt collection, freeing teams to focus on boosting sales and improving customer service. This proactive approach fosters a healthier business environment for everyone involved.
For suppliers considering credit insurance, the first step is to evaluate their specific risk exposure and partner with experienced providers who understand their industry and client base. Platforms like CreditInsurance.com offer valuable resources to guide suppliers through selecting the right policy, optimizing coverage, and using insured receivables to secure better financing options.
In a landscape where 28 million U.S. firms rely on trade credit to fuel their operations, credit insurance is more than a safeguard – it’s a strategic tool for growth and resilience. Far from being just another expense, it’s an investment in long-term success and stronger business relationships.
FAQs
How can credit insurance help suppliers maintain steady cash flow and financial stability?
Credit insurance plays a key role in helping suppliers maintain a steady cash flow and safeguard their financial health. It does this by protecting businesses from the risk of unpaid invoices, ensuring they still receive consistent cash inflows – even if a customer becomes insolvent or faces financial difficulties.
It also minimizes the strain caused by bad debt and delayed payments, allowing suppliers to avoid operational disruptions. With this protection in place, suppliers can manage their liquidity more effectively and pursue growth opportunities with greater peace of mind.
What should suppliers look for when selecting a credit insurance provider and policy?
When choosing a credit insurance provider and policy, it’s important to focus on a few critical areas to ensure the coverage fits your business needs. Start by assessing the provider’s financial strength and reputation in the industry. This gives you confidence that they can handle claims effectively and provide dependable support when it matters most.
Take a close look at the policy details, including coverage limits, terms, and exclusions. These should align with your business’s specific risk profile and operational demands. A mismatch here could leave gaps in your protection.
Another key factor is the claims process. It should be clear, straightforward, and efficient – no one wants to deal with unnecessary delays or confusion during a critical time. Also, see if the provider offers customized solutions tailored to your industry or customer base, which can make a big difference for businesses with unique needs.
For businesses in the U.S., make sure the policy addresses risks like non-payment, customer insolvency, or political disruptions, all while adhering to local regulations. A well-structured policy not only safeguards your cash flow but can also strengthen relationships with your suppliers by providing a layer of financial security.
How can credit insurance help suppliers expand into new markets?
Credit insurance helps suppliers expand their business by minimizing the financial risks tied to offering credit to new or international customers. It shields suppliers from issues like non-payment, customer insolvency, and other financial setbacks, giving them the confidence to extend credit to buyers they may not have worked with before.
With this safety net in place, businesses can take on larger orders, venture into new markets, and strengthen relationships with customers – all without putting their cash flow at risk. On top of that, credit insurance can make it easier to secure financing. Lenders often view insured receivables as a safer bet, which means suppliers can access funds more easily to support their growth plans.
