This guide walks you through what trade credit insurance is, how much it costs, what influences premiums, and clever ways to reduce the cost, or use alternative tools like iwocaPay to keep your cash flowing.
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We live in a world in which it seems like insurance exists for absolutely everything, but if you have a business in the UK, trade credit insurance could be the buffer that protects your business when a large client fails to pay much-needed funds. Liquidity is absolutely imperative when running a business, and trade credit acts as a lifeline to get a business through situations it didn't think it would find itself in.
Trade credit insurance protects a business if its customers don’t pay their invoices for whatever reason. That could mean a client goes bankrupt, disappears into administration, delays payment so long it’s considered a default, or flat-out refuses to pay. In simpler terms, it’s insurance for your accounts receivable, the money you’re owed but haven’t collected yet. Trade credit insurance is an important tool that gives businesses in the UK more freedom and room to grow, without having to worry about cash flow or holding back much-needed investment in the business.
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There is no fixed price tag or equation that's universally accepted for trade credit insurance pricing. If there were, we would make a little model below so you could plug in your numbers, and you would know the exact cost. Instead, premiums are tailored to the unique risk profile of your business, your industry, your customers, and your business habits. Just like car insurance, or any other insurance for that matter, the more risk you bring to the table, the more you’ll pay.
Below, we break down the five biggest factors that influence cost and walk through examples to show how they work in practice.
Your premium is usually quoted as a percentage of your insured turnover—i.e., the total value of invoices you want covered. This is often referred to as the rate-on-turnover (ROT).
The general rule is: the more you insure, the lower your percentage rate tends to be. That’s because insurers benefit from scale, diversification, and a broader spread of risk across your customer base.
Example: How turnover and risk profile affect trade credit insurance premiums
These examples align with published estimates from major insurers and market analysts, who place typical ROT premiums for UK businesses between 0.1% and 1.0% of insured turnover, depending on customer risk, claims history, and sector type.
Some industries naturally come with more risk than others. Construction is a good example; contractors often wait months to get paid, and one delay can ripple through the whole chain of suppliers. Manufacturing is another one; one bottleneck out of Taiwan, and the entire supply chain has problems. Compare that to something like IT services or consulting, where clients are usually billed on a set schedule and payments come in more consistently. The difference in cash flow predictability results in a lack of certainty in these types of industries, and thus, insurance premiums are typically higher.
Insurers look closely at who you sell to, how many customers you have, their credit history, and the risk tied to each one. If your entire customer base consists of people who have repeatedly claimed bankruptcy, you could be in for a world of hurt when it comes to pricing. Furthermore, a company with one hundred smaller clients, most with solid credit, usually gets cheaper premiums than a company relying on just three or four big buyers, even if both bring in the same revenue. This is why diversification is so important. The logic is simple: losing one customer out of one hundred hurts less than losing one out of four.
Example:
Diversification and customer quality are key. A “client concentration” risk, where a single account makes up a large portion of your sales, will push up costs.
Insurers also weigh your history with trade credit insurance. Just like car insurance, a clean record works in your favour while a string of claims pushes your rate higher. A business with no claims in the past five years might be quoted around 0.25% of turnover, while a similar company that’s had two claims in the last couple of years could see rates closer to 0.45%–0.6%. Same revenue, same industry, but the track record makes all the difference.
If a business exports, then trade credit insurance can be used to cover commercial risks abroad as well. Foreign insolvency, cross-border disputes, wars, embargoes, currency controls, and tariffs are all considered possible risks. These days, the tariff and embargo risks are front and center. For instance, a UK furniture wholesaler selling into France or Germany might pay around 0.3%. But if the same company sells into Nigeria, Argentina, or Turkey, the rate could climb to 0.6% or higher because of political instability and stricter payment restrictions in those markets.
Pro Tip: If your customers have excellent credit, and your own internal controls are tight, you may be able to negotiate a lower rate, especially if you're insuring £500K or more in turnover. Ask your provider for:
Trade credit insurance is available for everyone, not just large multinational companies with UK bases. In fact, it's increasingly accessible to UK SMEs across a variety of differnet industries. Much of this change and focus on SMEs is due to the fact that most providers offer much more flexible pricing based on turnover, risk, and coverage type.
In the UK, the typical premium range falls between 0.05% and 1.0% of insured turnover per year. Where your business lands in that range depends on the nature of your trade, who your customers are, and how much of your turnover you want to insure.
Leading insurers all point to a similar ballpark for trade credit insurance costs. Allianz Trade notes that most UK businesses pay under 1%, often less than £13,500 on a £4 million turnover. Atradius puts the range at 0.1%–0.5% of turnover, while Coface and Davies Group suggest 0.2%–0.7% for SMEs. iwoca’s data lines up too, showing many small firms pay between 0.05% and 0.6%, with 0.2% being the sweet spot for companies insuring £500k–£2 million.
Trade credit insurance doesn’t need to be a lump-sum financial hit. Most UK providers now offer:
Spreading your trade credit insurance premium across monthly or quarterly payments can help with cash flow, but just like any insurance options with multiple plans and packages, they come with trade-offs. Here's how the different options compare:
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Trade credit insurance doesn’t have to be expensive, especially if you take proactive steps to manage your risk profile. Insurers reward businesses that demonstrate control, discipline, and awareness. Whether or not you’re new to trade credit cover or looking to trim down an existing premium, these are some of the most effective ways to reduce your costs while maintaining solid protection:
Rather than insuring every customer, you can opt for a named buyer policy that covers only your most valuable or highest-risk accounts. This approach can reduce your premium by as much as 50% while still safeguarding the core of your revenue stream. It’s ideal for SMEs that want protection without insuring low-risk or low-value clients.
A strong internal credit policy is one of the clearest signals to insurers that your business knows how to manage risk. That includes:
Knowledge is power, and if you can get your hands on some of the insurer's data and analyze it, you might be able to get a better premium. Most credit insurers now provide dashboards that track buyer risk scores, credit limits, and trade history. These tools are not just for underwriters. They help businesses decide whether to keep offering terms to a customer, adjust pricing based on risk, and catch early warning signs if a buyer’s profile starts to slip.
It’s tempting to file a claim whenever an invoice goes unpaid, but insurers take note. A pattern of small or frequent claims may increase your future premiums or result in stricter exclusions.
Trade credit insurance is powerful, but it’s not your only option for protecting cash flow and managing invoice risk. Depending on your business model, margin tolerance, and customer profile, other tools may offer greater flexibility or better fit your cash cycle.
Here are three commonly used alternatives or complements:
Invoice factoring is when a business sells its unpaid customer invoices to a third-party factoring company at a discount to receive immediate cash flow instead of waiting for customers to pay. With invoice factoring, you sell invoices to a third party who takes on the credit risk and collects payment. You receive 80–90% of the invoice value upfront, minus a fee. With invoice discounting, you borrow against your invoices while retaining control of collections, making it more discreet, but you still carry the risk. Both options are helpful for businesses with long payment terms or seasonal cash flow needs, though fees can range from 1% to 5%.
iwocaPay is a modern B2B BNPL solution that gives your customers the flexibility to pay over time (e.g., 3 instalments), while you get paid in full instantly. It’s a win-win! Customers get breathing room, and you eliminate credit risk, late payments, and time wasted chasing invoices. BNPL tools are particularly valuable if you’re trying to grow sales or serve clients with cash flow pressures, without becoming their lender.
For smaller businesses, building an internal credit control framework can help manage risk without external coverage. Tools like Creditsafe, Experian Commercial, or Company Watch allow you to:
This method is low-cost and fully under your control, but it doesn’t offer any financial compensation if things go wrong. That’s why many SMEs use it alongside either trade credit insurance or iwocaPay.
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