As we continue to navigate the effects of COVID-19 to help guide and provide counsel to the businesses we support, we are seeing an increased number of clients reviewing their policies in order to identify opportunities to file a claim for further protection in these uncertain times.

One example of this is clients inquiring about filing a claim under “accounts receivable coverage” through their business office or property insurance policies. The intent of accounts receivable coverage is not to collect on bad debt, but to assist an insured business after a covered physical loss to recover sums of money owed as a result of damage to accounts receivable records. With this in mind, let’s talk about trade credit insurance.

Extending credit to customers is essential in today’s business. Whether you are a contractor or manufacturer, chances are good that you have customers that you have extended payment terms to. So what happens if your customers can’t — or won’t — pay you? For example, what if you are a supplier to a chain of local restaurants and you had extended credit terms to your customer to allow them to pay you monthly. Now, as a result of state mandates and stay-at-home orders, your customer’s business is closed or has been severely impacted and they cannot pay their bills. This is where trade credit insurance comes in.

Trade credit insurance can provide coverage for accounts receivable as a result of bad debt. And this insurance can be used not only to protect accounts receivable, but as a tool by many businesses for growth because businesses can also use the insurance to invest excess capital.

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