Like any form of insurance, the business Credit Shield is purchased to avoid a large loss that could impair the performance of your company. Despite a company’s best efforts, large or catastrophic losses occur from:

One large long-term buyer unexpectedly failing
A significant change in the market or economy, where a number of buyers become distressed and are unable to meet their obligations in time.
A sudden shift in the political or economic conditions of a buyer’s country (exports)

The Business Credit Shield is a useful tool in improving financial performance and assists in developing more favorable financing arrangements.

Achieves Financial Objectives

Increases cash flow and profitability
Protects one of your largest assets i.e. accounts receivable.
Improves the quality of financial planning.

Better Access to capital

Financiers/banks value the security if insurance cover on receivable and may be prepared to give greater credit on more favorable terms.

Improves Financial Performance

Reduces bad debt reserves
Minimizes risk
Positively affects growth rate
Improves return in assets
Lowers borrowing costs

Business Credit Shield.

Policy Types

Domestic Risks Policy
Export Risks Policy

Policy Features


Minimum annual turnover of the insured

Domestic turnover of Rs. 10 crores for domestic risks policy.
Export turnover of Rs.20 crores for export risks policy.

Existence of effective credit management procedures.
Credit period not exceeding 180 days.


Declared Insolvency of your buyer.

The buyer is declared bankrupt.
He has made a valid assignment composition/arrangement for the benefit of his creditors.
A receiver has been appointed
Order has been made for compulsory winding up.
An effective resolution has been passed for voluntary winding up.
An arrangement binding on all creditors has been sanctioned by the court or “equivalent conditions”

Presumed Insolvency or protracted Default.

Presumed insolvency or protracted default by the approved buyer is the failure of the approved buyer to pay to the insured, at the end of the waiting period, the whole or part of the insured debt relating to goods delivered/services provided and accepted by the approved buyer.

Political Risks (For Type II only)

Political risk is the risk undertaken on non-payment of the buyer caused by a political act such as war, civil war, sabotage, embargo, cancellation of import/export contracts and imposition of import/export restrictions.

Major exclusions

Disputed debts.
Non-acceptance of merchandises or contract cancellation by the buyer.
If the insured has accepted an arrangement with the buyer, without prior approval.
If the rights under the policy are assigned by the insured without prior approval
Interest, taxes, consequential losses etc.
Disregard of agreed credit management procedures.
Sales made to subsidiaries/associates/public/govt. bodies.
Claims in excess of discretionary/sanctioned credit limits.
War, civil war (except as covered by the political risk endorsement), natural disasters etc.

iv) Basis of Indemnity

The basis of indemnity will be the invoice value.
Up to 85% of the insured loss would be indemnified
Payment will be the insured percentage of the insured loss, for sales made during the policy period, net of excess and subject of the maximum liability under the policy.

v) Risk Monitoring

The Insurer assesses the creditworthiness of buyers for fixing credit limits.
An extensive information database & constant monitoring provides an early warning to the insured that the buyer is in financial difficulty.
Enables the insured to withdraw from the relationship on a structured basis

vi) Procedure for Obtaining Cover

Completion of Proposal Form.
Issue of quotation by Insurer.
Payment of premium by the client.
Issue of Policy.
Credit Limit Application for buyers.

vii) Premium Payable

Premium Rate is the amount obtained by applying a rate percent on the annual insured credit sales turnover provisional premium to be paid in advance, on estimated insurable turnover, subject to adjustment on actual insurable turnover.

viii) Important Conditions to be fulfilled by the policy Holders

Prompt invoicing of sales
Turnover declaration
Monthly declaration of insurable turnover
Quarterly declaration of whole turnover.
Declaration of Overdue Payments
Monthly declarations of all payments that remain wholly or partially unpaid for more than 30 days from the due date of payment.
Take all necessary steps to maintain a legally enforceable contract.
Ensure that rescheduling or acceleration of debts is not undertaken without the approval of the insurer.
All authorizations and licenses to perform the insured contract and receive payment thereunder must be obtained and validated.
All deductions and amounts in excess of the insured percentage must be borne by the insured for its own account and un-insured.
The credit control procedures endorsed to the policy or detailed in the proposal form must be adhered to.

ix) Claims

The insured has to promptly notify the insurer of any loss, or the probability of loss.
Ensure all rights in respect of sale contract & insured debt are preserved and exercised.
Confirm that there is no dispute involved.
Institute legal proceedings if necessary.
Insolvency Claim- Confirmation of debt from the official liquidator, trustee in bankruptey, or other authorized agent.
Protracted Default Claim- Documentary proof such as non-receipt of payment, quantum of payment due, proof of delivery of goods etc, duly certified by a competent chartered Accountant, to establish proof of sale.

A claim shall be processed for settlement after:
Confirmation of debt from the competent authority, in case of insolvency
In case of protracted default, expiry of the waiting period, mentioned in the schedule of the policy, which shall be counted from the due date of the first unpaid invoice.

Standard Terms

Insured Percentage

The maximum percentage of the insured loss payable in the event of an admissible claim under the policy.

Insured Loss

The portion of the insured debt confirmed by the competent authority as payable in the event of insolvency.

In case of protracted default, that much debt that shall not be dispute less interim payments and recoveries.

Insured Debts

Amount owned under an invoice for sales made during the policy period to an approved buyer.

Approved Buyer

A buyer legally liable to pay the insured for goods delivered and
Has a credit limit sanctioned by the insurer or
Falls under the discretionary limit approved by the insurer.


The first portion of each and every loss that shall be borne by the insured.

Discretionary Credit Limit

The amount, up to which the insurer permits the insured to set limits on his own, for small and medium sized buyers.

Credit Limit

Maximum liability of the insurer, in respect of an approved buyer.

Maximum Liability

The maximum amount payable under the policy, for all claims during the entire policy period.

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