What is accounts receivable insurance?

Accounts receivable insurance, also called A/R or trade credit insurance, protects your business from losses when customers can't pay what they owe due to covered risks, such as a default. Receivables insurance also keeps you up and running if important records are lost or damaged.

At Progressive Commercial, accounts receivable coverage may be included in a standard business owners policy (BOP). If you need more protection, you might be able to boost your policy with additions known as endorsements.

What does accounts receivable insurance cover?

Receivables insurance covers two kinds of payment collection challenges:

• Lost records: If your records are damaged in a covered event like a fire, accounts receivable coverage can help pay to recover your data, such as hiring a recovery specialist.
• Customer non-payment: Accounts receivable insurance may reimburse you for lost revenue if a customer can't pay what they owe due to unforeseen circumstances like bankruptcy or a fire.

What isn't covered by insurance for accounts receivable?

In general, accounts receivable insurance doesn't cover:

• Faulty or incorrect bookkeeping
• Customers who refuse to pay for defective or unsatisfactory goods
• Illegal activity, like falsifying records
• Miscommunications or misunderstandings with clients

Accounts receivable insurance examples

Accounts receivable insurance can be helpful in a variety of circumstances. For instance, imagine a fire breaks out in your building, destroying paper records and damaging computers where digital records are stored. Accounts receivable insurance could pay for the following:

• A data specialist to recover your records from damaged hard drives
• Temporary accounting employees to solicit payments
• Extra expenses related to restoring your records

In other cases, accounts receivable insurance can help make up for lost revenue.

Let's say you send shipments of product to two different customers. One customer doesn't have the money to pay what they owe. The other customer refuses to pay for the goods or return them, even though the cost is clearly indicated in the contract. In both cases, insurance for accounts receivable may help cover the lost revenue.

Do I need accounts receivable insurance?

Many companies could benefit from insurance coverage for accounts receivable. It can be especially helpful for businesses where payment issues with even one client can make or break the bottom line, like in cases where:

• You generate most of your revenue from a few big clients
• Your profit margins are thin
• You operate in countries where currency conversion issues or political sanctions may suddenly affect customers' ability to pay

How to get accounts receivable insurance

Accounts receivable insurance coverage isn't usually sold on its own. Instead, it's typically included in a business owners policy. A BOP combines several common business insurance coverages in a single package. For example, it includes business interruption, which pays for lost business income and ongoing expenses during disruptions from covered events, like fire or theft.

BOPs from Progressive Commercial are flexible and customizable. A basic BOP can include accounts receivable insurance, and you can add more protection if you need to. Get a quote or talk to our experts to learn more about this coverage and how it can help your business.

How much does accounts receivable coverage cost?

It depends. Accounts receivable insurance coverage is usually sold as part of a BOP, so it isn't priced as a standalone product. The amount it contributes to your monthly BOP premium is determined by factors like:

• Industry
• Location
• History of losses
• Coverage limits
• Size of your company

Accounts receivable insurance isn't a one-size-fits-all product. We can help you customize a policy with the right coverages and limits for your business.