Trade credit insurance is a very versatile product, and policies can be structured in different ways depending on the size of the business, its sector, risk appetite, and trading activity. This chapter outlines the main forms of coverage available, beginning with whole turnover policies (the standard structure in most markets) and moving through alternative models such as excess of loss and selected risk cover. 

Whole turnover

This structure is designed to cover a company’s entire portfolio of credit sales, rather than a cherry-picked selection of individual buyers or transactions. In practice, using a whole turnover policy means that coverage is automatically in place on all of a company’s transactions (so long as a valid credit limit has been approved), regardless of whether the company is selling to a reliable long-time customer or a brand-new one with inherently higher risks.

From the business’s perspective, this structure has clear advantages. There is no need to apply for coverage on a deal-by-deal basis or monitor which buyers are insured and which are not, which reduces administrative burden and simplifies the credit management process.

One key advantage (from the policyholder’s perspective) is the option for automatic cover. For example, if a company receives a last-minute order from a new buyer, it may not need to seek prior approval from the insurer. Provided that the buyer meets the policy’s eligibility rules or falls within a discretionary limit, the transaction is already insured. 

Proportional vs excess of loss coverage

Trade credit insurance policies can be structured in different ways depending on how the risk is shared between the policyholder and the insurer. The two most common models are proportional coverage and excess of loss. 

The table below offers a high-level comparison, while the rest of the section will take a closer look at how each model works in practice.

Aspect	Proportional Coverage	Excess of Loss
Definition	Covers a fixed percentage of each loss	Covers losses exceeding a specified limit
Payment Structure	Insurer pays a proportion of each loss	Insurer pays excess amounts over certain deductibles
Risk Retention	Insured retains some loss on each claim	Insured retains losses up to a limit (per buyer and/or in the aggregate per period of time)
Claims Management	May involve more frequent claims	Fewer claims but can be more substantial
Ideal for	Businesses expecting multiple smaller defaults	Businesses looking to protect against large losses

Proportional coverage

In a proportional policy, the insurer agrees to pay a fixed share of any covered loss (typically 85% to 95%), and the policyholder retains the remainder. The deductible (the proportion the policyholder must pay) is usually sized to ensure the policyholder cannot make a net profit on a claim, keeping their interests aligned with the insurer.

For example, if a covered invoice of $100,000 goes unpaid and the policy provides 90% coverage, the insurer pays $90,000 and the business absorbs the remaining $10,000.

When it fits: Proportional policies are well-suited for businesses that face frequent, moderate-sized losses across a wide customer base. They provide consistent protection and support smoother cash flow.

Excess of loss coverage

Excess of loss (XoL) policies work differently. Instead of sharing every loss, the insurer steps in only after losses exceed a certain threshold, which is known as a retention or deductible. This threshold can apply per transaction, across the policy year, or both.

Comparing these with an example can help illustrate the difference. Suppose a business experienced two bad debts during the year, one for $40,000 and the other for $150,000. 

Now, suppose that the business has an excess of loss policy with a $50,000 per loss deductible. Because the first bad debt (for $40,000) falls below this $50,000 per-loss deductible, it is not covered, and the business bears the full loss. The second bad debt (for $150,000) exceeds the per-loss deductible, so the insurer deducts $50,000 from the claim and agrees to pay the remaining $100,000.

If, instead, the policy had only an annual deductible of $100,000 and no per-loss deductible, the insurer would consider the total amount lost across the year ($40,000 + $150,000 = $190,000 in this case) and subtract the $100,000 deductible. In that scenario, the insurer would pay $90,000.

When it fits: XoL policies are better suited for larger companies with robust internal credit controls, who can manage smaller losses but need protection from rare, high-impact events. In this context, the XoL structure tends to be a more cost-effective form of protection because the insurer only pays when losses exceed a defined threshold. This means the policy is less likely to be triggered and therefore priced more favourably. 

Selected risk cover

Whereas whole turnover policies are designed to cover a broad portfolio of receivables (as discussed above), selected risk cover allows for targeted protection. This may include a subset of customers, a particular geography, a high-value buyer, or even a single transaction.

This structure offers flexibility but removes the benefit (for the insurer) of risk diversification, since the insurer is underwriting isolated exposures rather than a spread of risk. They will do this, but they will price these policies accordingly to account for the extra risk, meaning that premiums are typically higher.

Selected risk cover may suit policyholders dealing with unfamiliar markets, high-concentration exposures, or one-off deals that fall outside the scope of their main policy.

Readers can continue into the full Trade Credit Insurance Guide to compare these structures in greater depth and explore how policy design influences underwriting, pricing, and claims outcomes.