Commercial Legal Expenses Insurance can provide assistance with recovering certain unpaid debts owed to a business.

This can be useful where a customer has failed to pay an invoice after the agreed payment terms have expired.

How can debt recovery cover work? #

The process depends on the insurer.

A policy may require the business to follow a defined debt recovery process before formal legal proceedings are commenced.

This can include steps such as:

1. Issuing the customer with the required payment notice or demand.
2. Allowing the specified period for payment.
3. Referring the debt to an approved debt recovery professional.
4. Commencing legal proceedings if the debt remains unpaid and the policy requirements are satisfied.

The insurer or its appointed provider may manage or approve parts of this process.

Does the insurer pay the unpaid invoice? #

Legal Expenses Insurance should not be confused with insurance of the debt itself.

The cover is generally concerned with the cost of pursuing recovery of an insured debt rather than simply reimbursing the business for an unpaid invoice.

Trade Credit Insurance is a different type of insurance that can respond to certain insured losses caused by customer non-payment or insolvency.

Are all debts covered? #

No.

The policy can contain requirements relating to matters such as:

• The invoice being valid and due for payment.
• The debt arising after cover commenced.
• The business following its normal credit control procedures.
• The amount being above any minimum threshold.
• The debtor being located within an eligible jurisdiction.
• The debt not already being disputed or known to be problematic before cover commenced.

If a customer has not paid an invoice, check the policy requirements before commencing formal legal action or appointing a debt recovery firm.