Trade Credit Guaranty | Indicative Costs
As all situations vary, it is not possible to be precise, as to the cost of a policy.
Trade Credit Guaranty Price Calculation
Pricing will take account of such things as:
- Size of your business
- Your trade sector you operate in
- Overall quality of your customers
- Geographical spread of your export sales
- Your previous Bad Debt Loss history
- Quality of your Credit Control procedures.
Taking all the above factors into consideration, we would typically see a premium rate between 0.15% - 3.5% charged against 'net insurable' sales turnover. 'Net insurable' sales turnover relates to sales made on credit terms of payment, transacted with third party customers, excluding inter-company, UK public buyers, cash sales, and VAT.
Frequently Asked Questions Regarding Indicative Costs
How is the premium charged?
Premium may be charged as a fixed premium for the period or by way of a premium rate applied to the 'net insurable' sales turnover ESTIMATE for the period which is usually 12 months. The resultant sum is then charged, usually in instalments, over the policy period. These instalments may be monthly, or, more commonly, quarterly, and are paid in advance.
Is there a minimum premium requirement?
Most Insurers will impose a minimum premium clause, which is based, typically, upon 80% to 90% of the estimated 'net insured' sales turnover. This allows for up to 20% slippage in the ESTIMATE.
How is premium adjusted at the policy year end?
At the end of the policy year, a declaration of ACTUAL 'net insured' sales turnover, is made, and compared against the estimate against which deposits have been paid. This comparison will result in either payment of an adjusting amount to cover any shortfall between estimate and actual, or a refund in the event of shortfall of actual against estimate, after taking into account any minimum premium.
Are there any further charges?
The majority of Insurers make a charge for Credit limits. This covers the cost of investigation on Credit limit applications and on-going maintenance of information on the particular buyer. These charges may be applied in the form of a 'one-off' fee, based upon an estimate of annual usage, and payable at inception of the policy, or 'per application'.
Most insurers include Debt Collection within their policy. In some cases an extra charge is levied for this service. Where this applies, the charges may subsequently be reclaimable under the policy, should liability for a loss be confirmed.
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