FreightMaths› Supply Chain Finance› Trade Credit Insurance Cost Calculator

Trade Credit Insurance Cost Calculator — Bad Debt vs Insurance Cost

Calculate whether trade credit insurance is worth the cost. Premium vs expected bad debt losses — find the break-even bad debt rate where insurance pays off.

Quick answer: Trade credit insurance costs 0.1–0.5% of insured revenue. On $20M AR with 0.3% premium: $60K/year. If bad debt historically exceeds 0.5% of revenue, insurance typically pays. Below 0.2%, self-insure.

🛡️ Trade Credit Insurance Cost Calculator

% of bad debt that policy covers (after deductible)
High concentration = higher bad debt risk
Higher AR allows more borrowing — coverage has financing benefit
Recommendation
—
Annual Premium
—
Break-Even Bad Debt
—

How to Use This Calculator

  1. Enter revenue and current bad debt — actual write-offs from the last 12–24 months.
  2. Get an insurance quote — premium rates vary by customer concentration, industry, and credit quality — get quotes from Euler Hermes, Atradius, or Coface.
  3. Compare to break-even — if your bad debt rate exceeds the break-even, insurance pays. Below it, self-insure.

Worked Example

$20M revenue, $85K bad debt, 0.25% premium, 90% coverage.

  1. Annual premium: $50,000
  2. Recovery: $76,500
  3. Net insured cost: -$26,500 (net gain!)
  4. Break-even bad debt rate: 0.28% ($55,556)
  5. Current rate: 0.43% — insurance wins

With bad debt at 0.43% vs break-even 0.28%, insurance generates net value. Key additional benefit not modelled: insurance enables higher credit limits to customers (and more sales) and provides credit intelligence on buyer financial health.

Frequently Asked Questions

High customer concentration (top 3 customers > 40% of revenue — one default is catastrophic). Selling to new or unknown customers (insurance includes credit monitoring). Export/international sales (higher default risk, harder to pursue). Economic downturns (bad debt rates spike). Companies using factoring or ABL (insured AR is a better borrowing base).

Standard coverage: commercial bad debt (customer insolvency or protracted default), political risk for international buyers (transfer risk, contract frustration). Not typically covered: disputed invoices, customer dissatisfaction, your own insolvency. Major providers: Euler Hermes (Allianz), Atradius, Coface, QBE, Lloyd's syndicates.