September 29, 2020

What is Trade Credit Insurance - and Why Did COVID-19 Make Businesses Realize They Might Need It?

On March 11, 2020, the World Health Organization officially declared COVID-19 a global pandemic. According to a recent publication on the economic impact of COVID-19 by the Proceedings of the National Academy of Sciences, the median business with more than $10,000 in monthly expenses only had about two weeks of cash on hand at the time of the survey.

As leading commercial insurance brokers, our Agency Partners have examined the circumstances surrounding the pandemic, which enables them to custom-tailor policies to help protect your business from future disasters. Read on to learn more about the volatilities exposed by the pandemic and how trade credit insurance may help to serve as a solution in the future.

The COVID-19 Burdens Shouldered By Small Businesses

Due to the pandemic, many U.S. businesses closed temporarily or began operating at a limited capacity. To recover from suddenly crippled revenue streams, some businesses sought funding through the Coronavirus Aid, Relief, and Economic Security (CARES) Act—but many businesses saw it as difficult to establish eligibility and the program quickly ran out of funds. With no access to government aid, some business owners hoped to file claims for losses under their commercial insurance policies that provided coverage for business interruption.

However, for business interruption coverage to apply to revenue losses, in general, physical damage must be the underlying cause of such losses to the insured business. As a result, although they may have had coverage for business interruption, many business owners realized they did not have coverage for revenue losses resulting from COVID-19—but unfortunately, they realized too late.

How Trade Credit Insurance Can Help Protect Businesses

To help protect businesses from future threats, they should consider adding a trade credit insurance policy to help cover losses from non-payment of a commercial trade debt.

If customers are unable to pay, a trade credit policy can pay a percentage of the debt owed, typically 90% of the amount outstanding. This specifically helps protect against customer insolvency, protracted default, political events, acts of war or disasters like the coronavirus pandemic, among other things.

How to Apply for Trade Credit Insurance

Due to the hard lessons learned from COVID-19, trade credit insurers are now experiencing a surge in new applicants. Acrisure’s Agency Partners deliver in this area by working with TRG (Trade Risk Group), which specializes in trade credit insurance and knows how to help custom-tailor a policy to fit the needs of individual businesses.

We can thoroughly evaluate a business, including its goals for growth. And, we can also examine the financial health of a business’s customers and potential customers, assessing how likely its customers are to pay invoices on time. This helps businesses better understand the coverage amounts recommended—and can also act as a roadmap for avoiding potentially risky customers.

Find the right trade credit insurance partner to help protect your business from future disasters. Contact an Acrisure Agency Partner today.

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