Credit insurance

A clear overview for UK decision-makers

Credit insurance protects your business if customers do not pay for goods or services supplied on credit terms. It helps you manage late payments, protracted default and insolvency, so your cash flow remains predictable. In a market where margins are tight and credit terms are common, it can be the difference between a recoverable setback and a serious loss.

In the UK, the backdrop is shifting in a cautiously positive direction. Company failures fell by around 5% in 2024 and are forecast to ease further into 2026, which lowers average credit risk. At the same time, many firms still face pressure. Retail sales in 2025 improved slightly yet remain more than 2% below pre-pandemic levels, while inflation near 3.8% and wage growth above 7% continue to squeeze margins. Over half a million companies are reported to be in significant financial distress, with hotspots in London and the South East. This mixed picture explains why more businesses are pairing prudent credit control with formal insurance protection.

Insurers are supporting that need. Trade credit insurance exposure reached a record £3 trillion in 2025. The market remains competitive and stable, with improved capacity, broader policy options and rate reductions for well-managed risks. Fewer global claims and steady insurer performance also help keep conditions buyer-friendly. For many SMEs, the benefit is practical and immediate: insured receivables can improve access to finance, while the policy’s risk insights help guide safer growth.

This guide sets out how credit insurance works, what it covers, common exclusions, pricing influences and eligibility. It is written to help you compare options confidently and choose cover that fits your risk profile and trading goals.

Insurance can offer real financial protection, but only when you understand what is covered - and where the gaps are.

What is covered in practice

Credit insurance typically covers losses when a customer fails to pay due to insolvency, protracted default or political events, depending on the policy. If a UK buyer enters administration and your invoices remain unpaid after the waiting period, an insured percentage of the outstanding debt can be recovered under the policy. For export sales, political risks such as government actions or transfer restrictions may be included if you select that option.

Most policies set credit limits for each buyer, based on insurer assessment. You trade within those limits and notify the insurer of overdue accounts in line with policy rules. If a loss occurs, you submit evidence of the debt, your credit control actions and any security held. After assessment and the excess is applied, the insurer pays the insured portion up to the limit.

There are important exclusions and conditions. Disputes over quality or delivery usually suspend cover until resolved. Sales outside approved terms, or to buyers without an active limit, may not be covered. Extended payment plans often need insurer approval. Fraud, contractual penalties and currency fluctuations are commonly excluded. Export cover may require documentary proof such as bills of lading and evidence of shipment within specified time frames. Claims must be reported promptly to avoid prejudicing recovery.

The aim is straightforward: protect agreed receivables, encourage sound credit management and help you trade with confidence, at home and abroad.

Who benefits most

This cover suits UK businesses that sell on open account terms and would be materially impacted by a major customer default. Manufacturers, wholesalers and service firms with concentrated customer exposure stand to benefit, as do suppliers into the retail sector where recovery remains fragile. Exporters trading into markets with political or payment risks may find political risk extensions especially useful.

SMEs can gain improved access to finance, as lenders often view insured receivables more favourably. Larger corporates may use bespoke structures to protect multi-country portfolios and meet governance requirements. If you operate on cash-in-advance, use secure payment methods, or have negligible debtor balances, credit insurance may be unnecessary. Equally, if you hold strong security or guarantees that fully cover exposures, the incremental value may be limited.

Choosing a level of protection

1. Essential

• Scope: Insolvency and protracted default on approved UK buyers only.
• Limits: Lower aggregate limits and higher excess to manage cost.
• Use case: SMEs starting with key accounts or concentrated domestic exposure.

2. Standard

• Scope: UK and selected export markets, including political risks where required.
• Limits: Moderate limits per buyer with flexible discretionary credit approval.
• Use case: Growing firms trading across regions that need broader protection.

3. Comprehensive

• Scope: Global portfolios, political risk extensions, top-up limits and tailored clauses.
• Limits: Higher buyer limits, reduced excess, enhanced recovery and pre-shipment options.
• Use case: Larger businesses with complex supply chains and international receivables.

Optional add-ons

• Key account top-ups: Increase limits for strategic customers beyond the core facility.
• Excess buy-down: Reduce your retained loss for material claims.
• Pre-shipment cover: Protect costs incurred before dispatch for made-to-order goods.
• Single risk policies: Cover a specific contract or buyer when concentration is high.
• Broker or MGA enhancements: Access sector-specific wordings and risk insights.

Shortlist cover by mapping buyer concentrations, overdue trends and export exposures. Select higher limits and political risk where they directly reduce the likelihood of a severe cash flow shock.

What it costs and why prices vary

Prices vary by turnover, average debtor days and limit requirements. The UK market is competitive, with increased capacity and new MGAs improving choice and reducing exclusions. Fewer global claims and stable insurer results have supported buyer-friendly terms, but firms with weak controls or distressed portfolios should expect closer underwriting scrutiny and potentially higher rates.

Can you apply - and what you may need

Most UK-registered businesses that sell on credit terms can apply. Insurers usually request recent financial statements, aged receivables, top customer exposures, debtor days and details of your credit procedures. Exporters may be asked for country splits, Incoterms and documentation processes. Larger programmes may require loss data and recovery outcomes over several years.

Common reasons for decline include adverse financials, very high buyer concentrations without mitigants, a history of unresolved disputes or insufficient credit controls. Policies often rely on timely reporting of overdue accounts and adherence to agreed credit limits. If you cannot meet these operational requirements, cover may be restricted or offered at higher cost. A specialist broker can help present your risk positively and align information with insurer expectations.

From quote to claim - the simple path

1. Map debtor exposures and decide which buyers or markets need protection.
2. Request quotes with turnover, aged debtors and credit control procedures.
3. Compare scope, limits, excess, political risk and discretionary credit terms.
4. Bind cover and align internal credit limits with insurer-approved limits.
5. Monitor buyers, report overdues promptly and follow policy collection steps.
6. Submit claim with invoices, statements, correspondence and recovery evidence.
7. Receive settlement after excess, within limits and policy waiting periods.

Strong risk management can unlock better pricing, broader terms and higher limits.

Benefits and trade-offs to weigh

Key checks before you proceed

Read the wording carefully. Focus on the definition of insolvency, protracted default periods, and dispute handling rules. Confirm cover percentages, aggregate and per-buyer limits, and any waiting times before a claim is payable. Understand the excess and whether you can buy it down. Review discretionary credit approval thresholds, notification timelines for overdues and the documentation required for exports. Ask how renewal pricing is assessed and what triggers a mid-term limit reduction. Make sure policy conditions align with your credit control workflow so you can comply day to day.

Alternatives that might fit better

1. Trade finance or invoice finance - If you need working capital more than risk transfer.
2. Letters of credit or bank guarantees - When you want payment security on specific export deals.
3. Bad debt reserves and tighter credit terms - If exposures are small and easily absorbed.
4. Surety bonds or performance bonds - For contract performance and payment obligations rather than trade receivables.
5. Credit checks and buyer monitoring services - Useful where insurance is not cost-effective but vigilance is vital.

Common questions

Q: Is credit insurance worth it in a improving UK market? A: Company failures have eased, but many firms remain under pressure. Insurance can stabilise cash flow, support lending and enable safer growth, particularly where exposures are concentrated or margins are tight.

Q: Does it cover late payment as well as insolvency? A: Policies often cover protracted default after a waiting period when recovery appears unlikely. You must follow collection steps and notify overdues in line with the policy to remain eligible.

Q: Can I insure just my biggest customer? A: Single risk or key account top-ups are available. Insurers will assess concentration, financial strength and your reliance on that buyer. Pricing may be higher due to focused exposure.

Q: How do insurers set buyer limits? A: They review financials, payment behaviour, sector conditions and country risk, then assign a limit. You trade within that limit and request adjustments if your exposure grows or risk improves.

Q: What about international sales and political risk? A: Many policies offer political risk extensions covering events like transfer restrictions or government actions. Documentation requirements and country limits will apply, so check them before shipping.

Q: Will technology help manage the policy? A: Yes. Insurtech tools can streamline limit management, provide clearer portfolio insights and simplify claims tracking, reducing admin and improving decision-making.

What to do now

Take stock of your debtor book, identify critical accounts and any export exposures, then compare quotes that match those realities. Look for clear limits, workable notification rules and a fair excess. If the terms are not practical for your processes, keep looking. A specialist broker can help you refine the scope and secure competitive, suitable cover.

Important information

This guide provides general information only and is not personal financial advice. Policy terms vary by insurer. Always read the full wording, including exclusions and conditions, and check that cover fits your business before you buy.