What Is Contract Frustration Insurance?

What Does Contract Frustration Insurance Cover?

Before you choose a policy, map the parties, countries, goods or services and payment schedule in your contract; those details shape which risks you need to discuss. ⁸

Contract-frustration insurance can protect you against losses when political events or government action disrupt an international contract. ^1,2

Start With the Transaction

For each quote, identify your contract, the country and whether the other party is privately or government owned. ³

Who Needs Contract Frustration Insurance?

Consider this for an international contract exposed to political disruption or government action, using the actual countries, parties and payment schedule. ^8 8

Contract Frustration Insurance Coverage Examples

What happened

Government Action Stops a Shipment

A government action prevents you from completing a delivery under an international contract.

How coverage may help

Contract frustration may cover the loss if that action and stage of the contract are insured. Protection before delivery can differ from protection for nonpayment afterward. ^1,2,4

What happened

A Buyer Refuses to Pay

A private buyer refuses to honor the contract, leaving you with an unpaid balance.

How coverage may help

Some proposals address a buyer's refusal; others don't. The policy may also require a waiting period, notice and collection efforts before payment. ^1,2,6,5

How Do You Compare Contract Frustration Insurance Coverage and Costs?

Before and After Delivery

For your quote, separate the risk before delivery from the risk after delivery. You may need to address unfinished work before delivery and payment after delivery; ask which risks the quote covers at each stage. ⁴

^{4 2,4 5}

Covered Events and Private Buyers

Ask which government actions trigger coverage and whether cancellation, non-delivery and nonpayment are treated differently. ^2,4 If a private buyer could refuse the contract, ask whether that event is covered and which conditions or exclusions apply. ⁶

The Share of Loss You Retain

Compare the share of a loss the quote insures, what you would retain, the limit and the coverage period. ^4,5

Payment Delays and Claim Timing

Ask how waiting periods, claim-notice deadlines and collection steps apply after a missed payment. ⁵

How Does Contract Frustration Insurance Compare With Related Coverage?

Trade Credit

If your main concern is a customer’s failure to pay, compare trade-credit insurance with the political and performance risks named in the contract-frustration quote. ^5,2

Key Person Insurance

Do not treat key-person and contract-frustration coverage as interchangeable; check which event each policy addresses. ⁷

What Do You Need for Contract Frustration Insurance Quotes?

The Contract and Financial Exposure

For a quote, gather the contract parties, countries, goods or services, payment terms, currency and the exposure you want insured. ⁸ Gather payment history, outstanding balances, security or guarantees and available financial information about the parties. ^{8 3 8 8}

Contract Frustration Insurance: Key Terms in Plain English

Retained Share

The portion of a loss your business keeps, compared with the share insured under the policy. ^4,5

Waiting Period

A period specified in the policy that affects recovery after a missed payment. Check it alongside notice deadlines and collection requirements. ⁵

Frequently Asked Questions About Contract Frustration Insurance