Helpful explinations and definitions for the most widely used terminology you may come across.
Annual Turnover
The VAT exclusive value of sales in any given year.
Bad Debt
The value of goods sold to a specific buyer which are not paid because the buyer fails - See Insolvency, or refuses to pay - See Protracted Default.
Bespoke Structures
A Trade Credit Insurance Policy which is specifically created to suit the needs of a specific business. This may involve increased risk share in exchange for lower premium.
Claim
Formal application to the Insurer for payment of an unpaid debt due to insolvency or protracted default.
Claim Payments
The value of the payment made to the insured in the event of a claim.
Confirmation of Debt
A formal confirmation from a liquidator of the amount of money the failed business owes the creditor.
Consignment stock
Goods supplied to a buyer for which invoices are raised when the buyer has sold the goods.
Consumer Credit Sales
Sales to a private individual. These cannot be the subject of a Trade Credit Insurance policy.
County Court Judgement
An order of a court against a debtor to pay money owed.
Customer Limit
This is the maximum credit exposure limit approved by the Insurer in respect of debts due from your customer.
Debtor Insurance
Provides your business with protection against the failure of a customer to pay their trade credit debts. It protects you against your customer's insolvency or the non-payment of invoices.
Export Sales
Sales to a buyer who is not a business registered in the UK.
FSA
The Financial Services Authority is the UK’s financial regulator set up by the government to regulate financial services including Trade Credit Insurance.
Indemnity
The proportion of any claim which the insurer meets. 90% of the VAT exclusive value of the invoice.
Insolvency
A judicial or administrative procedure whereby the assets and affairs of the customer are made subject to control or supervision by the court or a person appointed by the court, for the purpose of reorganisation or liquidation of the customer or the rescheduling, settlement or suspension of payment of its debts.
Insurable Ledger
That part of the sales ledger which does not include Crown debt. Crown debt, typically sales to government departments or local authorities, are excluded from cover and no premium is due on this turnover.
Insured Percentage
Is the percentage of the amount of loss that will be paid under the Policy in the event of a customer failure subject to any minimum retention, non qualifying loss or aggregate first loss where applicable.
Insurer
Chartis Insurance UK Limited
Losses
The value or number of Bad Debts.
Maximum Extension Period
Means the maximum period specified in the policy by which you can extend the original due date for payment of the Insured Debt.
Maximum terms of payment
Means the maximum period of credit you may extend to the customer as defined and agreed in the policy.
Minimum Premium
The lowest value you can pay in any given year irrespective of turnover. Our policy does not include a minimum premium unless specifically agreed with you in advance.
Minimum Retention
This is the minimum amount of each loss that you shall retain for your own account as specified in the Policy.
Notice Period
The minimum warning that you must give us and we must give you to cancel the policy.
On-Line System
A dedicated on-line system "e-bonded" is available for all clients which allows day to day management of the Debtor Insurance Policy.
Overdue Debts
For the purposes of the Trade Credit Insurance policy this is your invoice terms plus 60 days.
Overseas Sales
See Export Sales
Policy Period
Means the period of time from and including the Inception Date until such time as the policy is terminated in accordance with the terms of the Policy.
Premium
Amount paid by you to the Insurer in return for risk coverage. This is based on your turnover at an agreed premium rate plus Insurance Premium Tax payable monthly.
Projected Turnover
The turnover you expect to generate in the current financial year.
Protracted Default
Where a UK company fails to pay invoices a claim will be paid when you have a County Court Judgement awarded in your favour or where a non UK company fails 6 months after the due date of the invoices.
Reporting Requirements
Policy Conditions require clients to advise the Insurer of customer debts that remaining 60 days or more overdue.
Trade Credit Insurance
Another name for Debtor Insurance.
Turnover
Means the total of all invoices raised in respect of goods sold and delivered and for services rendered in the course of your business.
Turnover Declaration
Annual statement confirming the turnover that you have actually achieved for the year just ended.
Underwriter
The Insurer that issues the Debtor Insurance policy.
Uninsured Percentage
Means the percentage of each loss which you must retain for your own account.
Unsecured
Refers to debts which are not guaranteed in any way should the buyer fail.
Whole Turnover Policy
The Debtor Insurance policy offers protection for all your company's trade receivables provided a customer limit has been approved.
Work In Progress
Work In Progress means any costs or expenses you incur for the design or manufacture of goods to be delivered within a maximum of one month from the date of a written purchase order and which goods have little or no resale value and cannot be used to satisfy any alternative order and have been designed and manufactured specifically for that customer.