Personal Guarantee Insurance

When it comes to taking out a business loan, there’s a very high chance the lender will require the owner or director to sign a personal guarantee. This provides the lender with an extra layer of security, but it also means you will personally be liable for the debt should your business fail to pay back the loan. 

Signing a personal guarantee does come with some advantages and disadvantages, most lenders will opt out of offering you a loan without that additional security. With so much personally at risk, it could be worth insuring yourself with Personal Guarantee Insurance. 

How does personal guarantee insurance work?

Like any insurance product, it’s designed to protect you should the worst happen. It acts as a safety blanket giving you peace of mind as there’s such much at risk personally. 

Personal Guarantee Insurance is specially designed to protect your personally owned assets should your business fall into liquidation. Set up on an annual basis, you can put it to the back of your mind for another 12 months. Covering multiple industries with policies based on your individual needs, director personal guarantee insurance could be the peace of mind you’ve been looking for. 

The application process is quick and easy, all you’re required to do is fill out the insurer’s online application form with your requirements and they come back to you with a quote. It is beneficial to note that most insurers will cover previous new and existing personal guarantee agreements. 

What are the benefits of Personal Guarantee Insurance?

When you sign a personal guarantee on unsecured loans and secured loans with a finance provider, you relinquish the legal right to keep your business, personal wealth and finances separate. This means that if your business is unable to repay the debt, the lender will look to you to repay the loan from your personal assets.

If you can’t pay back your loan, you risk losing the personal asset you used to secure it, which is usually your home. Personal Guarantee Insurance decreases risk so you can focus on building your business; it also distributes risk among all your company’s directors. Multiple personal guarantees can be looked at for a limited company with more than one director signing a personal guarantee.

Some businesses have business finance via a range of business loans, taking out personal guarantee insurance could act as a safety blanket should the unimaginable happen. An unsecured business loan and a secured business loan will almost always require a guarantee from business owners and directors, the guarantee amount is in line with the advance you take out. 

You may believe that you do not want or need Personal Guarantee Insurance because your business is currently thriving. However, it’s critical to explore “what ifs.” What if your company suddenly starts to struggle? What if your clients don’t pay you and you start to struggle financially? Protect yourself and your business. Although having a positive business perspective is beneficial, you must also be practical.

How much does Personal Guarantee Insurance cost?

How much does Personal Guarantee Insurance cost?

As with any form of insurance, there’s no set cost and each individual insurance policy and cover available differs depending on the business’s current circumstances, needs and level of cover warranted. The amount you will pay will vastly depend on the amount of personal guarantee you’d like insuring, annual premiums will always fluctuate in line with your loan repayment. The most accurate way of determining the cost is to fill out the insurer’s application form with your requirements and receive a quote.

How much can I cover with Personal Guarantee Insurance?

How much can I cover with Personal Guarantee Insurance?

The insurance coverage begins at a lower proportion and increases as your company expands and strengthens, the more solid your company is, the lower the lender’s risk. In your first year, you may expect roughly 60% of your personal guarantee to be covered, with that figure rising to around 80% after a few years. Keep in mind that no insurance policy will cover the entire amount of your personal guarantee.

Where can I purchase Personal Guarantee Insurance?

Where can I purchase Personal Guarantee Insurance?

As far as we know, there is only one provider that offers Personal Guarantee Insurance (PGI) in the UK, Purbeck Insurance Services. Below we have our own portal for our clients where you can receive a personal guarantee insurance quote and a member of Purbeck can talk you through your personal guarantee insurance cover options. We don’t work with insurance brokers, we’re a credit broker, not a lender. Smart Funding Solutions Limited does not offer advice or services in this area of insurance. Smart Funding Solutions Limited have partnered with Purbeck Insurance Services, a trading name of Purbeck UK Limited who offer Personal Guarantee Insurance (PGI) on behalf of Markel International, an A-Rated Fortune 500 insurance company. They are authorised and regulated by the Financial Conduct Authority under firm reference number 75682.

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