"Do you want your bank to have first call on your estate?"
What is Debt Reduction or Guarantor Protection Insurance?
Most businesses, in order to start or expand, will have organised loans. Quite often these loans will require a personal guarantee and are secured against personal assets, most commonly your own home. Such 'guarantees' are not extinguished until the loan is repaid in full. The lender may be able to call on the guarantee in the event of death, disablement or traumatic illness. The majority of banks treat these events as a default on your loan and may seek repayment or at least renegotiation of your loan.
Guarantor Protection ensures that in the event of death, total and permanent disablement or traumatic illness your share of business debt can be repaid in full. The family home is safe.
Why does my business need Debt Reduction or Guarantor Protection Insurance?
Because without it you, your family and your business and its partners are at risk of financial loss. The insurance proceeds will extinguish the debt and the personal guarantee, releasing the lender's security over your personal assets. Your business and its remaining owners are also freed from further financial burden and have their own personal assets released from the bank's security.
How much Debt Reduction or Guarantor Protection Insurance does my business need?
This generally depends on the terms of the loan.
If the loan is 'joint and several' each owner is responsible for 100% of the loan and as guarantors each remains vulnerable until the loan is repaid in full. In such cases each guarantor should be insured for 100% of the debt.
If the loan is 'several' and each guarantor is liable for only a portion of the debt then only that portion needs to be insured.
We are able to assist you in determining the level of cover you require.
