When a customer stops paying and you hold trade credit insurance in Malaysia, what you do in the first few weeks can decide how much of the debt you get back. Under a trade credit policy, you report the overdue account to the insurer within the deadline in your policy, stop further shipments to that buyer when the policy tells you to, and then the insurer tries to collect the debt before paying your claim, which under one insurer's standard terms can take close to a year from the invoice date. Reporting an overdue account late can reduce your claim or lose it altogether, so the notification deadline is one of the most important steps.
This guide follows an unpaid invoice from the due date to the claim payment, using one insurer's standard terms in Malaysia as the worked example. Every policy sets its own periods, so treat the timings as an illustration and check your own policy schedule. If you're still deciding whether a policy makes sense, start with our guide to trade credit insurance in Malaysia.
By the end you'll know what to do at each stage, what can derail a claim, and how much of the debt you can expect back.
Worried about a customer who's already paying late?
Tell us what's happening with your receivables and we'll explain whether trade credit insurance could help with future sales to that buyer and the rest of your book. Our trade credit insurance guide explains how cover works before you commit to anything.
The timeline at a glance
Here's how the stages fit together under one insurer's standard terms, for an invoice on 60-day terms where the buyer never pays and the seller notifies on the last allowed day. The day counts are from the invoice date.
| Stage | What the policy says (one insurer's standard terms) | Illustrative day |
|---|---|---|
| Goods delivered, invoice issued | Invoice within 30 days of delivery | Day 0 |
| Payment due | Credit terms of 30 to 60 days on the invoice | Day 60 |
| Extension, if you agree one | Terms can be extended by up to 60 more days | Up to day 120 |
| Maximum credit period ends | 120 days from invoice date | Day 120 |
| Deadline to notify the insurer | Within 30 days after the maximum credit period ends, and stop new shipments | By day 150 |
| Insurer's collection period | 150 days (5 months) from notification, or 2 months for a lower insured percentage | Around day 150 to day 300 |
| Claim paid | About 30 days after the collection period ends | Around day 330 |
Illustrative timeline based on one insurer's standard terms. Your policy may set different periods, and notifying earlier than the deadline brings the later dates forward.
Stage 1: Before and just after the due date
The policy expects you to keep running normal credit control, so chase the invoice the way you always would. Send reminders before the due date, follow up promptly once it passes, and keep a record of every contact, promise and reason the buyer gives, because the insurer is likely to ask for this history if the account ends up as a claim.
If the buyer asks for more time, check your policy before agreeing. Under the example terms you can extend credit terms by up to 60 more days, but the extension can't take the debt past the maximum credit period of 120 days from invoice, and an extension beyond what the policy allows can leave that debt uninsured.
Stage 2: Notifying the insurer
Once a debt is overdue past the point your policy sets, you must tell the insurer, and under the example terms that's within 30 days after the maximum credit period ends. You can generally notify earlier if you see clear warning signs, although notifying generally means stopping new shipments to that buyer, while notifying late can cut or lose the claim.
| What to have ready (insurers typically ask for these) | Why the insurer needs it |
|---|---|
| Buyer's registered name and registration number | To match the debt to the right approved credit limit |
| Invoices, delivery documents and the amounts outstanding | To confirm the goods were delivered and the debt is owed |
| Your contract or terms with the buyer | To confirm the payment terms and any retention of title |
| Your record of chasing and any payment promises | To see what's been tried and whether the buyer disputes anything |
| A statement of account and details of any security you hold | To confirm the balance owed and include any security in the recovery |
Stop supplying when the policy says so
Under the example terms, you stop new shipments to the buyer once you notify. More generally, once a debt is overdue beyond the period your policy allows, further deliveries to that buyer are usually not covered unless the insurer agrees, so goods you keep sending are generally at your own risk. It's an easy mistake to make when you're under pressure to keep a big customer happy, so if you want to keep trading on secured terms, such as cash before delivery, discuss it with the insurer first.
Stage 3: The insurer's collection period
After notification, the insurer tries to recover the debt, and under the example terms it keeps pursuing 100% of the amount owed, including your uninsured share. The standard collection period in the example is 150 days (5 months) from notification, and the policy allows you to shorten it to 2 months in exchange for a lower insured percentage, 1 percentage point less for each month cut, up to 3 points.
During this period, many policies require the insurer's approval before you agree a settlement, a compromise or new repayment terms with the buyer, and insurers often direct or approve any legal action and its costs. The reason is that any deal you strike affects what the insurer can recover, so check your policy conditions and ask before you act.
Would your finance team know exactly when to notify and when to stop shipping?
Talk to Emerge about how a trade credit policy would fit your credit control process. We handle limit requests, reporting deadlines and claims alongside your team, so an overdue account is less likely to turn into a missed deadline. Read how the cover works in our guide to trade credit insurance in Malaysia.
Stage 4: The claim payment
If the insurer hasn't recovered the debt by the end of the collection period, it pays your claim, which under the example terms happens about 30 days later. The payment is the insured percentage of the covered loss, commonly up to about 90% for commercial risk, less any deductible, and it's capped at the credit limit that was approved on that buyer. Globally, ICISA says the payout usually ranges from 75% to 95% of the invoice amount.
| Illustrative claim | Debt within the limit | Debt above the limit |
|---|---|---|
| Approved credit limit on the buyer | RM1,000,000 | RM1,000,000 |
| Amount the buyer owes | RM800,000 | RM1,200,000 |
| Covered loss | RM800,000 | RM1,000,000 (capped at the limit) |
| Claim paid at 90% insured percentage, no deductible | RM720,000 | RM900,000 |
| Loss you carry yourself | RM80,000 | RM300,000 |
Illustrative scenario, not a specific case. Actual claims depend on your policy's insured percentage, deductible, limit and conditions.
The second column shows why the size of your limits matters. Sales above the approved limit are usually uninsured, so if a buyer's balance regularly runs above its limit, ask for a limit review before a problem appears.
Stage 5: Recoveries after the claim is paid
Paying the claim doesn't end the insurer's efforts. It usually continues to pursue the buyer, for example through the liquidator if the buyer is insolvent, and any money recovered later is generally shared between you and the insurer according to the policy, often in proportion to each side's share of the loss.
What can derail a trade credit insurance claim?
The conditions below are the ones that can reduce or block a claim, so they're worth building into your normal credit control process.
| What goes wrong | Likely effect on the claim | How to avoid it |
|---|---|---|
| Notifying the insurer after the deadline | Claim reduced or refused | Put the notification deadline into your monthly debtor review |
| Continuing to ship after you should have stopped | Later shipments uninsured | Set an automatic stop-supply trigger in your system |
| Extending terms beyond the policy's maximum credit period | Debt may fall outside cover | Check the policy before agreeing any extension |
| A disputed invoice | Claim usually waits until the dispute is resolved in your favour | Keep clear contracts, delivery records and acceptance evidence |
| Selling above the approved limit | Only the limit is covered | Monitor balances against limits and request reviews early |
| Selling to a buyer with no approved limit | No cover for that buyer, unless your policy allows a discretionary limit | Request limits before first shipments to new buyers |
| Agreeing a settlement without the insurer | Can affect or reduce the claim | Ask the insurer before any settlement, payment plan or legal step |
What if your customer disputes the invoice?
A disputed debt is treated differently from an unpaid one. If the buyer says the goods were wrong, late or faulty, the insurer will generally wait until the dispute is resolved in your favour, by agreement, a final court judgment or an arbitration award, before treating the amount as a claim, because it only covers debts the buyer actually owes.
This is why good paperwork is part of your protection. Signed delivery orders, clear specifications and written acceptance can make disputes less likely and quicker to resolve, and ICISA notes that parties are usually asked to resolve any dispute before the insurer becomes involved.
What if you don't have trade credit insurance?
You still have options, but you carry the full loss and the full cost of recovery. You can send a letter of demand, use a debt collection agency, or take legal action, and if the buyer is insolvent you can file a proof of debt with the liquidator. In Peninsular Malaysia, the Limitation Act 1953 generally requires an action founded on a contract to be brought within 6 years from the date the cause of action accrued (Sabah and Sarawak have their own limitation ordinances), but in practice the chance of recovery often drops much sooner as a struggling buyer runs out of money.
If this has happened to you once, it's worth asking what the next one would cost. Our guide to what insurers ask for before they quote shows the information you'd need to get cover in place for future sales.
FAQ
What should I do when a customer doesn't pay and I have trade credit insurance?
Keep chasing the debt as normal, check your policy's maximum credit period and notification deadline, and report the overdue account to the insurer on time. Stop further shipments to that buyer when the policy says to, and check with the insurer before agreeing any settlement or new repayment terms.
How long does a trade credit insurance claim take to pay?
It's often several months after you notify, because the insurer first tries to collect the debt. Under one insurer's standard terms, the collection period is 5 months from notification and the claim is paid about 30 days later, so it can take close to a year from the invoice date. Some policies let you shorten the wait for a lower insured percentage.
What happens if I report an overdue account late?
Your claim can be reduced or refused, depending on the policy wording. The notification deadline is one of the most important conditions in a trade credit policy, so it's worth building it into your monthly debtor review.
Can I keep supplying a customer who is paying late?
You can, but only within your policy's rules. Once a debt is overdue beyond the period your policy allows, further deliveries to that buyer are usually not covered unless the insurer agrees, so sellers usually stop or hold supply. Trading on secured terms such as cash before delivery may be possible if the insurer agrees.
How much of the unpaid debt will the insurer pay?
The insurer pays the insured percentage of the covered loss, commonly up to about 90% for commercial risk, less any deductible and capped at the buyer's approved credit limit. Amounts owed above the limit are usually not covered.
Does trade credit insurance cover disputed invoices?
It doesn't until the dispute is resolved. If the buyer disputes the goods or services, the insurer will generally wait for the dispute to be resolved in your favour, by agreement, a final court judgment or an arbitration award, before treating the amount as a claim.
What happens to money recovered after my claim is paid?
The insurer usually keeps pursuing the buyer for the full debt, and recoveries are shared between you and the insurer according to the policy, often in proportion to each side's share of the loss.
Emerge Conclusion
Trade credit insurance pays when a buyer fails, but only if the policy's conditions are followed, and the conditions that matter most are the notification deadline, the stop-supply rule and staying within your approved limits. The businesses that get the most from a policy are the ones that build those rules into their normal credit control.
If you're thinking about cover, or want help setting up a process your team can actually follow, Emerge works alongside finance teams on limit requests, reporting and claims throughout the policy year.
Talk to Emerge about protecting your receivables with trade credit insurance
Disclaimer: This article provides general information about trade credit insurance claims in Malaysia as of September 2026, where the timeline shown reflects one insurer's standard terms only and illustrative figures are examples only. Notification deadlines, collection periods, insured percentages and other conditions vary between insurers and policies, and the reference to the Limitation Act 1953 is general information, not legal advice. Nothing in this article is a promise that a claim will be paid. Always review your specific policy wording and consult qualified insurance and legal advisors before acting on an unpaid debt.
