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15 January 2026

Trade credit insurance (TCI) can make the difference between a thriving business and one that struggles when customers fail to pay. Yet, despite its importance, myths and misconceptions about TCI still exist, from doubts about cost to misunderstandings about what it actually covers.

In this article, we debunk the most common trade credit insurance myths, provide practical guidance, and show how Allianz Trade’s trade credit insurance solutions help you protect revenue, manage risk, and trade with confidence.

Summary

Key Takeaways

  • Trade credit insurance is a cost-effective, accessible way for businesses of all sizes to protect cash flow and reduce the financial impact of unpaid invoices.
  • Our TCI solutions offer broad protection and feature a streamlined, supported claims process through our digital platform.
  • TCI acts as both a safety net and a growth enabler, helping businesses expand confidently into new markets and offer credit without unnecessary risk.

     

Myth 1: Trade Credit Insurance is Too Expensive

The first common misconception is that TCI is too expensive, especially for smaller businesses. While the cost of premiums varies depending on factors such as industry, customer portfolio, credit limits, and risk profile, the expense is often a small fraction of total sales relative to the protection it provides.

Even a single unpaid invoice from a significant client can have a severe impact on cash flow, potentially disrupting operations, delaying payroll, or affecting supplier relationships. But TCI acts as a financial shield, ensuring businesses can continue to operate with peace of mind, even in the face of unexpected defaults.

Why TCI can be cost-effective:

  • Policies are priced according to risk exposure and sales volume, making them suitable for SMEs as well as larger enterprises.
  • Coverage can focus on high-risk or high-value clients, ensuring the investment is targeted and effective.
  • Businesses can extend credit to new clients without overexposing themselves financially.
  • Insured receivables are often viewed more favourably by banks and investors.

Here’s a practical example:

A mid-sized electronics distributor has several major clients accounting for a large portion of annual revenue. Without TCI, a single insolvency could significantly disrupt operations. However, with TCI, the distributor can safely offer credit to these clients and explore new accounts without worrying about sudden revenue loss.

This demonstrates that trade credit insurance is not just a cost, but an investment in stability and growth. For more details, see how much trade credit insurance costs.
 

Myth 2: Only Large Companies Need Trade Credit Insurance

Let’s debunk our next myth: trade credit insurance is only relevant for multinational corporations or large enterprises with complex supply chains. In reality, smaller and medium-sized businesses often benefit even more as they often have fewer resources to absorb the financial impact of customer non-payment.

TCI helps businesses of all sizes protect their cash flow, allowing them to trade without worrying about the risk of unpaid invoices. For SMEs, a single default from a key client could disrupt operations, delay payroll, or even jeopardise supplier relationships. But trade credit insurance mitigates this risk, providing stability and peace of mind.

How TCI supports businesses of all sizes:

  • Small and medium enterprises can offer payment terms to new or existing customers without taking on excessive risk.
  • Businesses can explore new domestic and international markets, knowing that payment defaults are covered.
  • Secured cash flow allows businesses to negotiate better terms with suppliers.
  • Even a single large unpaid invoice won’t threaten day-to-day operations.

Here’s a practical example:

A mid-sized manufacturing business supplies products to a growing number of clients. Without TCI, the company may limit credit or conduct extensive credit checks, slowing growth. However, with TCI in place, the business can safely extend credit to high-potential clients, as revenue is protected in the event of default.

By combining risk management with growth potential, TCI is a strategic tool for businesses of all sizes. For more insight, see our guide on the key benefits of trade credit insurance.

Myth 3: Trade Credit Insurance Only Covers Customer Defaults

Another common misconception is that trade credit insurance only protects businesses if a customer fails to pay due to insolvency. While covering non-payment is indeed the primary function, our TCI policies offer broader protection that addresses a variety of risks, helping businesses protect their revenue more effectively.

Allianz Trade policies can cover:

  • Client insolvency, offering protection when a customer becomes unable to pay due to bankruptcy or financial distress
  • Political and regulatory risks, essential for businesses trading internationally, covering events such as currency restrictions, sanctions, or sudden regulatory changes
  • Complementary coverage through business fraud insurance, protecting against internal fraud, external fraud, and social engineering attacks.

Here’s a practical example:

A UK-based exporter supplies goods to several overseas clients. One client goes bankrupt, while another is unable to pay due to a sudden political restriction on payments in their country. TCI guarantees the business is compensated for both scenarios, securing cash flow and reducing operational risk.

How TCI adds value beyond standard defaults:

  • It reduces exposure to unexpected financial losses
  • It enables confident trading in domestic and international markets
  • It works with complementary products like business fraud insurance* for comprehensive risk management

*However, it is important to remember that business fraud insurance is a separate product and not automatically included in standard TCI policies. Pairing TCI with fraud coverage strengthens protection, but businesses must choose this option intentionally.

By understanding the broader scope of coverage, companies can make strategic decisions that shield revenue, enable growth, and maintain financial stability in all circumstances.

Myth 4: Making a Claim is Complicated

Many businesses avoid TCI because they assume the claims process is slow, complex, or bureaucratic. In reality, Allianz Trade has a streamlined claims submissions process, making it straightforward and supported by expert guidance at every stage.

How the claims process works:

  1. Claims can be submitted quickly via the Allianz Trade portal, reducing paperwork and delays.
  2. Specialists guide you through documentation requirements, assuring your claim is complete and accurate.
  3. You’ll receive timely updates on the status of your claim, so you’re informed throughout the process.

Here’s a practical example:

A mid-sized manufacturing business discovers that a client has failed to pay an outstanding invoice. By submitting a claim online and following guidance from their Allianz Trade claims expert, the company secures compensation efficiently and continues operations without any hindrance.

Why this myth is misleading:

The claims process is designed to be user-friendly and transparent, with support provided for complex cases, including insolvency or fraud-related claims. Another reason is that efficient indemnification means businesses can focus on growth rather than disputes.

Trade credit insurance is therefore not only effective protection but also convenient, allowing businesses to recover lost revenue without unnecessary delays.

Myth 5: Trade Credit Insurance is Not Worth It

The most common misconception on the list is that trade credit insurance does not deliver sufficient value. The fact is that many businesses underestimate the potential financial impact of customer non-payment and the broader benefits TCI can provide for growth and stability.

Why TCI is worth it:

  • Protects your business against unexpected losses due to customer insolvency or non-payment.
  • Enables safe trading with new or existing clients without overexposing the business financially.
  • Businesses can explore new domestic or international markets knowing receivables are insured.
  • Insured receivables are often viewed more favourably by banks and investors.

Here’s a practical example:

A small exporter of power supplies wants to expand into new international markets but is concerned about the risk of unpaid invoices. With TCI, the business can confidently offer extended credit to new clients, shielded against both insolvency and certain political risks. This enables growth that might not have been possible otherwise.

For businesses asking, “is trade credit insurance worth it?”, it’s crucial to know that TCI often provides financial security and strategic growth potential, making it a highly worthwhile investment. Combining TCI with products like business fraud insurance further strengthens protection and helps manage a wider range of risks.

Practical Guidance for Choosing the Right Trade Credit Insurance

To get the most from TCI and use it as both a strategic growth tool and reactive safeguard, we recommend the following tips:

  1. Focus coverage on clients that represent the largest revenue share or carry higher default risk.
  2. Ensure invoices are fully protected according to credit terms.
  3. Use Allianz Trade’s portal to monitor exposure, submit claims, and track policies.
  4. Consider business fraud insurance to cover internal and external risks.
  5. Update coverage as your business grows, enters new markets, or takes on new client segments.

Empower Your Venture with Trade Credit Insurance You Can Trust

There you have it: five of the most common trade credit insurance myths debunked. We hope you now consider TCI as more than just a safety net, and instead a strategic tool that empowers businesses to grow with confidence while safeguarding revenue. Use the information in this article to make informed decisions, extend credit safely, and protect your business from unexpected financial losses.  

Take control of your business’s financial security today:

  1. Reach out to Allianz Trade to understand your credit risk profile and see where TCI can add value
  2. Explore Allianz Trade’s tailored trade credit insurance solutions
  3. Speak with an Allianz Trade advisor to design a policy that meets your growth and risk management needs

Don’t wait for a client default to impact your cash flow. Empower your organisation with Allianz Trade’s trusted trade credit insurance and expert guidance and trade with confidence in any market.


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Our expertise and commitment

Allianz Trade is the global leader in trade credit insurance and credit management, offering tailored solutions to mitigate the risks associated with bad debt, thereby ensuring the financial stability of businesses. Our products and services help companies with risk management, cash flow management, accounts receivables protection, Surety bonds, Business Fraud Insurance,  debt collection processes and  e-commerce credit insurance ensuring the financial resilience for our client’s businesses. Our expertise in risk mitigation and finance positions us as trusted advisors, enabling businesses aspiring for global success to expand into international markets with confidence.

Our business is built on supporting relationships between people and organisations, relationships that extend across frontiers of all kinds - geographical, financial, industrial, and more. We’re constantly aware that our work has an impact on the communities we serve and that we have a duty to help and support others. At Allianz Trade, we’re strongly committed to fairness for all without discrimination, among our own people and in our many relationships with those outside our business.