Trade credit insurance

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Written by Chloe XY Chin
Expert reviewed by Adrian Taylor
Updated 8 September 2025

What is trade credit insurance in Australia?

Trade credit insurance (also known as debtor insurance or accounts receivable insurance) can help mitigate the risk of providing customers with credit terms, as it helps businesses, whether small businesses or SMEs, protect themselves against commercial bad debts and protect their cash flow. Industries that often use this cover include wholesale and distribution, manufacturing, agriculture, construction, transport, logistics and export/import businesses.

How does trade credit insurance work?

Trade credit insurance can protect your business if a customer fails to pay you for goods or services on credit. Business owners with trade credit insurance can have peace of mind knowing that their business insurance can help with risk management, covering non-payment, debt collection, payment default or even political events in applicable cases.

Here’s how a typical policy process works:

  • Policy setup: You work with an insurance broker or provider to tailor the policy. You’ll submit information about your customers and receivables.
  • Assessing credit limits: The insurer assesses your customers and the trade credit risk before assigning credit limits.
  • Ongoing monitoring: The insurer may monitor your receivables and require periodic reporting of overdue accounts.
  • Making a claim: If a customer defaults, you can lodge a claim after the waiting period (often 60–90 days after the invoice due date).
  • Claim payment: Once approved, the insurer pays out the insured portion (typically 80–95%) of the outstanding invoice.

What does trade credit insurance cover?

Depending on your level of cover, trade credit insurance can cover selective clients that have a higher risk of non-payment, such as an individual contract holder or only their largest debtor, excess of loss or cover your entire credit portfolio.

Trade credit insurance typically covers:

  • Customer insolvency: When a customer enters liquidation, administration or bankruptcy and has unpaid debts.
  • Payment default: If a customer simply doesn’t pay within a defined period, usually 60–90 days beyond the due date.
  • Political risks (for exports): Includes risks like civil unrest, import/export restrictions or blocked currency transfers.

What does trade credit insurance not cover?

How much does trade credit insurance cost?

cat looking at piggy bankPremiums are usually calculated as a percentage of your total insured turnover and vary depending on several factors.

These factors include:

  • Your industry and customer locations
  • Annual turnover and credit terms offered
  • Number and concentration of your customers
  • Claims history
  • Level of coverage and

Always compare different trade credit insurance policies and read the underwriting of the Product Disclosure Statement (PDS) to ensure that the insurance solution is right for you before getting any policy.

Is trade credit insurance worth it?

For many Australian businesses, the answer is yes, especially if you operate on tight margins, have significant customer exposure or are looking to scale with confidence. Here are some of the key reasons why trade credit insurance can be a valuable investment:

Protection against bad debts

Improved financing options

Professional risk assessment of your customers

Meet our business insurance expert, Adrian Taylor

Adrian Taylor
Executive General Manager – General Insurance

As a General Insurance expert with over 13 years’ experience in financial services, Adrian Taylor strongly believes in the protection and peace of mind that all types of business insurance provide business owners. Adrian says this type of cover can be the difference between a business staying afloat and going under if trouble arises.