The short answer
Trade credit insurance protects a business against non-payment of invoices, usually because a customer becomes insolvent or does not pay within a set period. Political risk cover deals with events abroad, such as currency restrictions or contract frustration, that stop payment or seize assets. It is arranged through specialist brokers and insurers, and it is built around who you sell to and on what terms.
- Manufacturers and distributors that sell to other businesses on invoice terms
- Exporters selling to customers or governments in other countries
- Companies with a few large customers that make up most of their sales
- Businesses whose bank wants to lend against receivables
- Firms investing in or building in countries with higher political uncertainty
No broker in the network handles this yet. You can still prepare and save the request now. It is kept, and requests like it show us which brokers to find next.
Outside Alberta, Canada you can prepare and save a request today; sending opens place by place. Brokers answer with their own quotes. Broker.insure does not quote, advise or take commission.
01 / What it covers
The parts worth understanding
Insolvency of a buyer
The insurer pays a share of the invoice if a customer goes bankrupt or enters a formal insolvency process. The insured share is stated in the policy and is never the whole amount.
Protracted default
A buyer simply does not pay for a long period after the due date. Policies set a waiting period before a claim can be made, and you must show you followed collection steps.
Whole turnover or single buyer
A policy can cover all your sales, a selected group of customers or one named buyer. Whole turnover is often easier to place, while single-buyer cover is more tailored.
Buyer limits
The insurer sets a credit limit on each customer you want covered. Sales above the limit, or to a buyer without a limit, are not protected.
Political risk
Losses from events such as government action, currency inconvertibility, war or cancellation of a contract abroad. It is used for exports, investment and long projects.
Financing support
Lenders often value insured receivables more highly. A policy may be assigned to a bank, which can change how borrowing is set up.
02 / Get ready
Bring this, and expect these questions
Gather
- A list of your top customers with their names, countries and annual sales to each
- Your standard payment terms and any longer terms given to larger accounts
- An accounts receivable ageing report showing what is overdue and by how long
- A history of bad debts or write-offs for the last several years
- Your credit control process: who approves credit, how you chase and when you stop shipping
- Details of export markets, currencies and any use of letters of credit
- Your financial statements and, if relevant, your bank's requirements
- Contracts for any large projects abroad, and where payment comes from
- Existing cover, such as export credit agency support
A broker will ask
- Who are your biggest customers, and what share of your sales do they represent?
- What payment terms do you give, and are any customers regularly late?
- Which countries do you sell to?
- Have you written off any debts, and what happened?
- How do you decide to extend credit to a new customer?
- Do you want cover on all customers, or only specific ones?
- Do you sell to government buyers or in countries with exchange restrictions?
- Does your bank require or benefit from insured receivables?
Not sure of an answer? Leave it. "Not known yet" is a fine answer, and a broker will help you fill it in.
03 / Build your request
Answer a few questions. Get your own list.
Pick what fits. Your answers shape the list beside them, and they are saved to your request as plain facts a broker can read. "Not sure yet" is always a fine answer.
04 / Three situations
See which one sounds like yours
A food ingredient supplier with one large retail buyer
A mid-sized supplier sells a large part of its output to a national chain on long payment terms. The owner has read about retailers failing and worries what a default would do to the company.
First steps. Pull a receivables ageing report and the contract terms with the chain. A broker can explain whether single-buyer cover is possible, what credit limit an insurer might set and what documentation is needed to support a claim.
A machinery exporter entering a new overseas market
A firm in Ontario is about to ship equipment to a distributor in a country it has never sold to. Payment is by invoice and the buyer's own bank is unfamiliar.
First steps. Collect the distributor's details, the contract and the proposed payment terms. Ask a specialist broker about buyer credit checks, whether the country raises political risk concerns and how letters of credit compare with insured open terms.
A contractor building a plant under a foreign contract
A construction firm has won a project abroad paid in stages by a state-owned client. If the government changes or currency rules shift, payments could be frozen even though the client is solvent.
First steps. Gather the contract, payment schedule and details of the paying entity. A political risk broker will ask about the host country, the payment currency and what dispute process applies, and can say whether cover is realistic for the project.
05 / Words you will hear
The jargon, in plain words
- Credit limit
- The most the insurer will cover for unpaid invoices from one named buyer. It is set after that buyer is reviewed, and it can be reduced or withdrawn later.
- Insolvency
- When a buyer cannot pay its debts, through bankruptcy, a court-supervised restructuring or a formal arrangement with creditors. It is the main event trade credit cover is designed for.
- Protracted default
- A buyer who has gone unpaid for a set period past the due date without any formal insolvency. Policies usually add a waiting time before a claim is allowed.
- Receivables
- Money customers owe you for goods or services already delivered. They are the asset trade credit cover protects, and lenders often lend against them.
- Ageing report
- An accounting summary listing unpaid invoices by how overdue they are. Insurers and lenders read it to see how reliably your customers actually pay.
06 / Common mistakes
What trips people up
- Thinking trade credit insurance covers every unpaid invoice, when it pays only an agreed share on approved buyers within limits.
- Selling above a buyer's credit limit or to unapproved customers and expecting a claim to be paid.
- Waiting until a customer is already in trouble, when insurers will not cover known problems.
- Failing to report overdue accounts on time, which many policies require.
- Confusing political risk with ordinary foreign exchange swings, which are not insured losses.
- Treating the policy as a replacement for good credit checks and collection work.
Ready when you are
Turn this into one clear request.
Save it, add what you know, and choose when to send it. A licensed broker who handles trade credit insurance takes it from there.
07 / Questions people ask
Straight answers
What is trade credit insurance?
It is cover that pays a share of an unpaid commercial invoice when a customer becomes insolvent or fails to pay within a set period. It protects the business's cash flow and can support borrowing. The insurer evaluates your customers and sets limits for each, so protection applies only to approved buyers.
How does trade credit insurance work?
You apply for a policy, the insurer reviews your customers and sets a limit on each, and you sell within those limits. If a covered buyer defaults, you notify the insurer, follow its claims steps and receive an agreed share of the loss. Reporting overdue accounts promptly is usually a condition.
Is trade credit insurance worth it?
That depends on your customers, your margins and how much one default would hurt. Businesses with a few large customers, thin margins or export sales feel the risk most. A broker can explain the structure so you can compare the cost of cover with the exposure you would otherwise carry on your own.
What is political risk insurance?
It covers losses caused by government or political events abroad, such as currency being blocked from leaving a country, expropriation of assets, war, or cancellation of a contract. It is used by exporters, investors and contractors. It does not cover ordinary commercial losses or normal currency movements.
What is the difference between trade credit insurance and a letter of credit?
A letter of credit is a bank undertaking to pay on presentation of the right documents. Trade credit insurance is a policy that pays a share of a loss if a buyer does not pay. They are different tools and are sometimes used together, depending on the market and the buyer.
Can small businesses buy trade credit insurance?
Often they can, though insurers look at the size of the sales covered and the quality of customers. Some programs are built for smaller exporters, and some brokers specialize in them. If your business is small, say so and ask which structures are open to you.
General information, not insurance advice. Broker.insure is a directory and request service: it is not an insurer and does not quote, bind or advise. Policy terms, availability and what is required where you live depend on your situation and on licensed professionals. Updated 2026-10-31.