How to choose a non-payment insurance policy

Key Points

1 Credit insurance protects businesses against unpaid invoices, rents or payments.
2 There are different types of credit insurance depending on the transaction and the risk assumed.
3 Credit insurance helps prevent non-payments, manage debt recovery and indemnify losses.
4 Terms, cost and timelines depend on the client profile and sales volume.
5 Choosing the right credit insurance improves liquidity and provides stability for business growth.

Protecting what you have built through hard work is a priority. No one wants to face financial problems caused by third parties failing to meet their commitments. That’s why having a safety mechanism to back you up in these scenarios is vital. This is where non-payment insurance comes into play.

At RibéSalat, we see every day that non-payment affects not only peace of mind, but also puts pressure on cash flow, halts growth plans, or turns an investment into a problem. That’s why we’re going to explain what non-payment insurance is, the types available, what it covers, and much more so you can obtain maximum protection for your business.

What is non-payment insurance?

Also known as credit insurance, it is a policy designed to reduce the economic impact when the other party does not pay what they owe. Depending on the case, it can cover unpaid rent, unpaid commercial invoices, or loan instalments when the debtor is unable to meet them due to covered circumstances. There are different types:

  • Non-payment of rent: protects landlords against unpaid rent and usually includes legal defence related to the lease agreement.
  • Non-payment of invoices: protects against insolvency or late payment by clients.
  • Loan default (aimed at individuals): covers loan instalments in cases such as unemployment or temporary incapacity, depending on the policy conditions.

Key benefits of non-payment insurance

  1. Risk prevention

The insurer continuously monitors each client in your portfolio and provides information on solvency and payment behaviour. With this data, you can make more informed business decisions and maintain a safer sales policy, especially when:

  • Expanding your portfolio with new clients
  • Increasing credit limits for existing clients
  • Entering sectors with higher payment uncertainty
  1. Debt recovery

If prevention works well, non-payments are reduced. Even so, when a serious delay or default occurs, credit insurance provides a practical advantage: debt recovery is handled by specialised professionals, which usually increases the likelihood of recovering an insured sale while, at the same time:

  • Reducing internal administrative burden
  • Preventing your sales team from burning out chasing payments
  • Helping to preserve the relationship with the client, since the complaint is handled professionally
  1. Compensation

When recovery is unsuccessful or takes longer than reasonably expected, non-payment insurance provides compensation for the loss according to the policy’s limits and conditions. This way, a significant non-payment does not automatically translate into a financial hole that drags down the business.

  1. Direct impact on financial health and growth

As a result of these three layers (prevention, recovery, and compensation), credit insurance:

  • Protects the balance sheet by limiting the damage caused by late payments
  • Helps improve cash flow by reducing the impact of non-payments and prolonged delays
  • Enhances the ability to request financing by providing greater stability and control over customer risk
  • Allows negotiating better payment terms with more confidence
  • Facilitates opening new business relationships more securely when aiming to grow without overexposure

Who is required to pay for credit insurance?

It depends on the type of credit insurance (non-payment insurance) and how the commercial relationship has been agreed.

General rule: the party that wants to protect its receivables or balance pays

Typically, it is contracted and paid for by the company exposed to non-payment. For example:

  • Sales on credit (invoices to clients): usually contracted by the company that sells and invoices, because it is the one seeking to protect its accounts receivable.
  • Rental of premises or other leases: usually taken out by the party wishing to guarantee rent payments (typically the landlord, if the aim is to cover tenant defaults).
  • Financing or loans: paid by the party seeking to cover its instalments in case of income loss, if it is linked to payment protection insurance.

When the client “requires it”: not a legal obligation, but a commercial condition

In some sectors or transactions, a client may request specific coverage (or certain guarantees) as a condition to close the deal. In such cases, it is not that the law requires payment: it is part of the agreement between companies. This can occur, for example, when:

  • Long payment terms are negotiated
  • Entering new markets or dealing with unknown buyers
  • Working with major accounts that impose risk management requirements

Can the cost be passed on to the client?

Sometimes, attempts are made to pass it on indirectly (for example, by adjusting prices or payment terms). However, normally the cost is treated as a risk management expense and is factored into the commercial policy: margins, credit limits, terms, and early payment discounts.

How long does it take to approve a non-payment insurance policy?

The “approval time” doesn’t usually depend on the type of credit insurance or the information available. In general, the clearer and more complete the documentation, the faster the coverage can be issued.

Non-payment of invoices

Approval is usually structured in two stages:

  • Initial setup and configuration of the policy: includes analysis of your business (activity, volume of credit sales, history of non-payments, concentration by clients, countries if exporting) and definition of conditions (which operations are covered, limits, deductibles, and how non-payment is managed). This stage can take longer because it is customised to your portfolio.
  • Client approval (credit limits): once the policy is in place, a limit is requested or assigned for each buyer. This limit is what allows you to sell with greater security. In portfolios with good information and identified clients, this step is usually faster. When data is missing or the buyer is more complex, it can take longer.

Non-payment in rental of premises or other leases

In leases, approval focuses on analysing the tenant’s risk (solvency and payment history if available) and validating the contract and documentation. If everything is provided from the start, the response can be quick; if there are missing items or changes to conditions, the process is extended.

What usually slows down approval 

  • Client portfolio highly concentrated in a few accounts
  • Lack of financial statements or buyer information
  • International operations or complex corporate structures
  • Requested limits high compared to purchase history
  • Need to adapt conditions (excess, exclusions, terms)

How much does credit insurance cost?

The cost of a credit insurance policy is usually not a fixed rate, but is calculated based on the actual risk and how your business sells (to whom, how much, in what terms, and with what client concentration). 

Non-payment of invoices

Credit insurance is usually calculated taking into account variables such as:

  • Volume of credit sales: the higher the insured amount, the greater its weight in the premium
  • Client portfolio profile: average solvency, payment history, dispersion or concentration
  • Risk concentration: relying on a few large accounts entails higher risk than a diversified portfolio
  • Sector and type of buyers: some sectors have structurally higher default rates than others
  • Payment terms: longer terms tend to increase risk
  • Geographic scope: domestic sales vs. exports, countries and currency, where applicable
  • Claims history: previous non-payments and how they were handled
  • Level of coverage: indemnity percentage, limits per buyer, excesses, waiting periods and exclusions
  • Services included: client monitoring, prevention tools and debt recovery management

Non-payment in the rental of premises or other business leases

Pricing usually depends on:

  • Amount of rent
  • Monthly instalments covered
  • Tenant solvency and supporting documentation
  • Scope of legal defence and possible additional coverage

What tends to makes the policy more expensive

  • High concentration in a few clients
  • High limits per buyer
  • Extended payment terms
  • Presence of markets with a higher uncertainty of collection
  • History of non-payments or recurring incidents
  • Need for broader coverage (higher indemnifiable percentage or lower excess)

Don’t let a non-payment decide for you

Non-payment insurance makes the difference between managing a default with a clear plan or facing it through urgency, legal costs and wear and tear. The key lies in matching the right type of policy to the reality of your company.

If you want to review options and terms with sound judgement, at RibéSalat we are your insurance and reinsurance broker, with over 35 years of experience, helping you compare cover, limits and requirements without wasting time on the small print. Request a consultation so we can advise on the solution that best fits your case.

FAQs

What is the risk of client non-payment?
The risk is the likelihood that a client will not pay an invoice within the agreed term or will fail to pay it altogether due to lack of liquidity, financial deterioration or insolvency. In businesses, this risk is usually influenced by factors such as the client’s financial health, payment history, the stability of the sector in which it operates, the concentration of your sales with that client and the quality of the contractual relationship.
Does credit insurance cover invoices issued to companies within the same group or related entities?
It depends on the policy and, above all, on how it defines “buyer” and “insurable risk”. In many cases, sales to related companies, companies within the same group or entities with control relationships may be excluded or limited, as they are not considered transactions with an independent risk comparable to that of a third party. Even so, there are scenarios in which specific conditions may be considered if it can be justified that there is a genuine commercial relationship and a clear separation of risks.
What are the differences between credit insurance, factoring and reverse factoring when it comes to protecting collections?
Credit insurance protects against non-payment: if the client does not pay for covered reasons, the policy may provide indemnification and usually includes support for prevention and debt recovery. Factoring is a financing and management solution: you assign invoices to an entity to obtain advance liquidity and outsource collection administration. Reverse factoring, by contrast, focuses on payments to suppliers: it is a service provided by the paying company to manage payments and offer early payment to the supplier if they wish.
Can a single one-off transaction be insured, or is it necessary to insure the entire client portfolio?
It depends on the insurer’s approach and the type of product. In credit insurance, the most common option is a policy that covers a portfolio of credit sales, because risk is managed more effectively with a portfolio view and clear rules on limits per buyer. Even so, there are more limited solutions that allow a specific transaction or a specific client to be insured, especially when significant amounts, exports or new business relationships are involved.
How does credit insurance affect international sales and the risk of non-payment in exports?
In exports, the risk of non-payment is usually higher because more variables come into play: distance, legal differences, payment habits, greater difficulty in debt recovery and, depending on the country, additional economic or political risks. A well-structured credit insurance policy helps to organise this uncertainty by setting limits per buyer and coverage rules that allow you to sell abroad with greater control, while also supporting collection management when the client is in another country.
What are the most common mistakes when taking out credit insurance?
The first is treating it as an “automatic parachute” and failing to align the policy with commercial reality. It is also common not to review carefully what is considered a covered non-payment, what requirements apply when declaring a claim and how orders, deliveries and acceptance of the service must be documented, which later leads to friction when making a claim. Another frequent mistake is selling above approved limits or outside agreed conditions under the assumption that “it's insured”.
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