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What are the exclusions in a Trade Credit Insurance Policy?

Sep 15, 2023

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Trade Credit Insurance Policy

What are the exclusions in a Trade Credit Insurance Policy?
Contents

A Trade Credit Insurance Policy in India is one of the most important insurance policies for a business owner to secure himself against the risk of unpaid invoices. Today’s volatile economy has exponentially increased the risk of payment defaults.

Many sellers have gone bankrupt because the buyers have defaulted on payments owed to sellers. So, many business owners buy a Trade Credit Insurance Policy in India now to protect themselves from the risk of payment defaults.

What is a Trade Credit Insurance Policy?

A Trade Credit Insurance Policy also known as an Accounts Receivable Insurance is a type of Insurance Policy which pays the Seller in case the Buyer does not pay for the goods or services that he has received.

Apart from the Trade Credit Insurance Coverages, it is important that that Policyholder knows the exclusions in a Trade Credit Insurance Policy in detail.

This blogpost covers the Trade Credit Insurance Policy exclusions in detail.

What are the Exclusions in a Trade Credit Insurance Policy?****

The Exclusions in a Trade Credit Insurance Policy are as follows:

The Trade Credit Insurance Company is not liable for any losses arising out of:

  • failure of the Insured to fulfill any of the terms and conditions of the Insured’s Contract with the Counterparty Buyer;
  • failure of the Insured to comply with laws and regulations applicable to the Insured’s Contract with the Counterparty and the laws and regulations of the country

The Trade Credit Insurance Company does not have any liability:****

  • For that part of any Commercial credit which relates to interest or penalty for late payment;
  • In respect of any Contracts with private individuals (except individual entrepreneurs) acting in a personal capacity;****
  • In respect of the invoice value of goods for which payment for the goods or services is received on or prior to the date the goods are dispatched or services are rendered (that is, no coverage for advance payment);
  • For any losses where the Counterparty is the Insured’s parent company or one of the Insured’s subsidiary, or any other entity where the Insured has a controlling influence in the Counterparty unless the Trade Credit Insurer has agreed otherwise in writing;
  • For any losses where the Credit Limit specified by the Trade Credit Insurance Company for a Counterparty prior to the date the goods are dispatched or services are rendered is Nil;
  • Any loss resulting from destruction of or damage to the goods delivered under the Contract;
  • Any loss as a result of willful misconduct by the Insured or critical mistake by the Insured giving rise to the Insured event;
  • Any loss arising out of a failure by the Insured to honor any obligation stipulated in the contract;
  • any loss relating to the goods dispatched or services rendered to the Counterparty after the Trade Credit Insurer became aware of critical deterioration of the Counterparty’s credit status or Counterparty’s Insolvency;
  • any loss relating to the Small claim Threshold agreement, where the loss is within the Threshold amount for the small claims in each sales invoice;
  • any Loss incurred in relation to a sales transaction through letter of credit

The Trade Credit Insurance Company also has no liability under the Insurance for any loss****

  • incurred in relation to the sales transactions in which the goods were shipped from the shipping state to the importing state after the import restriction measures, etc. were taken by the importing state against the shipping;
  • incurred in relation to sales transactions in respect of which the insurance liability of the Trade Credit Insurer has terminated;
  • exceeding the Credit limit provided by the Trade Credit Insurance Company;
  • exceeding the Maximum Liability provided by the Trade Credit Insurance Company;
  • exceeding the Credit Limit for the Specific Counterparty to the Pooling agreement;

The Trade Credit Insurance Company does not have any liability under the Trade Credit Insurance Policy for losses incurred by the Insured due to Political Risks in India.****

The Trade Credit Insurer has no liability for:****

  • any part of the Commercial Credit which relates to goods dispatched or services rendered by the Insured after the occurrence of an Insured event or the cancellation / termination of Trade Credit Insurance Coverage
  • the following amounts and the Insured warrants that they are not secured by third parties (including insurance):
    • the amount which is not indemnified by the Trade Credit Insurer as a result of application of Self retention;
    • a part of the Commercial credit exceeding the Credit Limit for a Counterparty;
    • amounts exceeding the Maximum Liability specified in the Policy which is net of Self-retention.

Should I Purchase a Trade Credit Insurance Policy for my business?****

Trade Credit Insurance in India is an insurance policy that protects a seller who makes sales on credit basis. Bad debts are one of the top reasons that small businesses fail, but a Trade Credit Insurance Policy can help protect against such a risk. A Trade Credit Insurance Policy can also help a business grow by allowing the seller to make sales in newer geographies and to newer customers. Thus, there are many advantages of a Trade Credit Insurance Policy and a business should definitely consider this option to protect itself from the risk of unpaid invoices.

If you wish to purchase a Trade Credit Insurance Policy in India, call +91 22 35134695 to know more!

  1. Trade Credit Insurance Policy – Coverage, Benefits and Exclusions
  2. Forget all your worries about Bad Debts
  3. Solution
  4. You can protect yourself from Risk of Bad Debts by purchasing a Trade Credit Insurance Policy
  5. What is a Trade Credit Insurance Policy?
  6. What does a Trade Credit Insurance Policy Cover?
  7. Protracted Default/Delayed Payment
  8. Insolvency
  9. Political Risks
  10. What are the Benefits of a Trade Credit Insurance Policy?
  11. Protection against Bad Debts:
  12. Potential for Increased Sales:
  13. Better Cash Flow:
  14. How does a Trade Credit Insurance Policy work?
  15. What is the Premium for a Trade Credit Insurance Policy?
  16. What is the Sum Insured for a Trade Credit Insurance Policy?
  17. What are the Exclusions under a Trade Credit Insurance Policy?
  18. What is the Claims Process under a Trade Credit Insurance Policy?
  19. Will my Premium be higher if I purchase a Trade Credit Insurance Policy through an Insurance Broker?
  20. Interested in purchasing a Trade Credit Insurance Policy and securing the risk of Bad Debts?

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