While traditional credit insurance primarily focuses on non-payment for goods or services already delivered, here’s what you need to know about protection against project or contract cancellation:

Limited Coverage in Standard Policies:

• Project Cancellation: Most credit insurance policies do not directly cover the risk of a buyer canceling a project or contract before goods are shipped or services are fully rendered.
• Focus on Insolvency: Standard policies are geared towards protecting against non-payment due to buyer insolvency or other covered defaults.

Specialized Coverage:

• Surety Bonds: These are a more suitable form of protection against contract breaches and project cancellation risks. Here’s how they work:
  • Three-Party Agreement: A surety company guarantees your performance to the project owner.
  • Compensation: If you default or fail to complete the project, the surety may step in to find another contractor or provide financial compensation to the project owner.
• Pre-Shipment Risk Insurance: Some pre-shipment insurance policies (as discussed earlier) may include coverage for contract cancellation or frustration, protecting your incurred production costs before shipment.

Combined Approach:

For large-scale projects with significant pre-shipment production or customization, a combination of surety bonds and pre-shipment risk insurance might offer the best protection.

Important Considerations:

• Policy Specifics: Always meticulously review the terms of any insurance product to understand coverage limits and exclusions related to contract cancellation.
• Project Risk Assessment: Carefully consider the potential for project cancellation before bidding or accepting a contract, especially in industries known for such risks.
• Contractual Terms: Strong contract negotiations with clear cancellation clauses and penalties can be an additional layer of protection.