Glossary

Trade credit insurance

Insurance that reimburses a seller when a customer fails to pay a valid invoice because of insolvency or prolonged default.

Also called: credit insurance, trade receivables insurance, export credit insurance, TCI

Trade credit insurance protects a business that sells on open account against customers who do not pay. It reimburses a percentage of the unpaid invoice when the buyer becomes insolvent or fails to pay within a set period after the due date, called protracted default. A policy can cover the whole sales ledger or selected buyers. The insurer assigns each buyer a credit limit, the most it will cover, based on that buyer's finances, and sales above the limit are uninsured.

Coverage is a form of first-party coverage with real conditions. The insurer pays less than 100%, so the seller keeps a share of every loss. Disputes over quality, delivery or contract terms are generally excluded, because the debt must be undisputed. Notice rules are strict: overdue accounts must be reported promptly, and shipping to a buyer past its limit or after a warning can forfeit a claim. A small percentage of insured sales usually sets the premium.

Sellers buy it to protect cash flow, to take on new customers or export markets, and to support borrowing, since lenders often advance more against insured receivables. It differs from a surety bond, which guarantees a principal's performance to an obligee, and from political risk cover. The guide on trade credit insurance: protecting receivables from customer default covers structure and claims.

Last reviewed October 10, 2026

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Related terms

First-party coverage Insurance that pays the policyholder directly for its own losses, such as damaged property or breach response costs, rather than defending claims by others. Retention The share of a loss a business pays itself, through a deductible, self-insured retention or captive, before insurance responds. Surety bond A three-party guarantee in which a surety promises an obligee that a principal will perform or pay, with the principal bound to repay the surety for any loss. Exclusion A policy provision that removes coverage for specified perils, property, people or types of loss that the insuring agreement would otherwise include.

Related guides

Political risk insurance: what it covers and who needs it Political risk insurance covers expropriation, blocked currency transfers, government contract breach and political violence abroad. Who writes it, how to buy. Sanctions clauses in insurance policies What sanctions clauses such as LMA3100 do, how OFAC risk reaches your policy, and how to read the wording before a claim, cargo shipment or ransom payment. Supply chain risk and insurance: what is covered and what is not How to map and score supplier risk, which insurance lines respond to supply chain losses, and the disruptions no policy covers: tariffs, strikes, insolvency. Trade credit insurance: protecting receivables from customer default Trade credit insurance reimburses part of unpaid invoices when a customer goes insolvent or defaults. How policies, credit limits and EXIM export cover work.

Related insurers

MSIG USA U.S. commercial arm of Japan's MS&AD: property, casualty, marine and financial lines for mid-size and multinational firms, plus MS Transverse fronting.