Not yet registered? Create a OverBlog!

Create my blog

A guide to trade insurance

Trade insurance is also referred to as credit insurance or business credit insurance. It is an insurance plan that safeguards the seller of goods and services from any risk of non-payment. A trade insurance policy covers credit risks and helps to promote both national and international trade.

Trade insurance FAQs

The policy holder or seller may have sold goods or services on credit to a buyer and it is possible that the buyer defaults on payments due to insolvency, wilful default, economic conditions, political turmoil, currency fluctuations and so on. Importance Trade insurance helps cover international trade risks because its schedules are often impacted. Moreover, international customs and general laws are complicated and payments can be rejected on technical grounds. There is risk of civil strife, crazy government decisions, and government interference in private business. Then, there is an omnipresent risk of default in both national and international trade, especially in tough economic times. Trader's insurance and road insurance can work in tandem to minimise the damage and delays inflicted by local accidents. International and national motor trade, and a few export-heavy sectors consider trade insurance as a blessing in disguise. Cost of tradex insurance It works to about 1% of the insured value. Sellers typically insure goods on invoice value, so that they do not lose out on their profit margin, which helps them to cover interest payments. Sellers can increase the sale price by 1% if they do not want to bear the insurance cost. Premiums First, the total annual premium payable on all shipments is estimated. At least 75% of this estimated yearly premium is collected by the insurance company. The seller files a sales report every three months, and the premiums payable on the actual shipments are deducted from the premiums paid in advance. Accounts are reconciled at the end of the year and the balance premium payment is made. Functions The insurance company’s underwriters analyse the buyer’s creditworthiness and the risk involved. The insurance company then specifies the extent of credit that can be covered for that specified buyer. It then sets a discretionary credit limit, which the seller can extend to the buyer. Any violation of the discretionary credit limit is a breach of policy. Sellers can buy insurance on a per transaction basis as well. Sellers can insure a few buyers, but then they will have to convince the insurance company that they are not insuring just the potential bad debts.

Final word

Trade insurance is very important and every seller must cover all risks for his and the stakeholders’ sake. If a seller finds it difficult to buy trade insurance, he must consult a broker.

Same category articles Insurance

All about: Contractors' all risk insurance

All about: Contractors' all risk insurance

Contractors' all risk insurance is a cover designed to cater for almost all possible losses that those involved in a construction project may face. This is because construction is one of the most lucrative and risk prone sectors in the real estate industry. As a result, insurers have created this product to cover losses. This article provides you with an overview of the Contractors' all risk insurance.
A guide to health insurance for low income families

A guide to health insurance for low income families

Getting health insurance coverage can be a challenge for low income families. The reality is that many people in a low income household do not have jobs which offer benefits like employer sponsored insurance and paying for insurance themselves can be a financial hardship. Luckily, there are a few acceptable and affordable options for families who find themselves in this situation.
An introduction to mortgage payment protection insurance

An introduction to mortgage payment protection insurance

In light of the unfortunate but progressively frequent reality of losing your home to foreclosure as a result of failing to make mortgage payments, mortgage payment protection provides a safety net. This will enable you to make your payments when you are in danger of not being able to meet financial requirements including but not limited to your mortgage payments.
All about: Health insurance in India

All about: Health insurance in India

There are a number of companies offering health insurance in India, including ICICI Lombard, Star Health, Royal Sundaram, and Max Bupa. It is presently estimated that the health insurance sector will grow exponentially from the current Rs. 8100 crores to about Rs. 30000 crores in five years.