Business Loan Insurance
If you have business loans (including Director's loans,
commercial mortgages or other debts associated with
the company), then business loan insurance can pay
the balance if an owner passes away or dies.
Commercial Loan Insurance
Many businesses will have liabilities that become unaffordable if an owner passes away or suffers from a critical illness. The business itself may still be viable, however the loss of a key individual could mean the business may not be able to maintain the same turnover and profit. Consequently, loans which are affordable today, may become unaffordable in the future.What is business loan insurance?
Business loan insurance can pay a lump sum of money to your business is an owner dies, or is unable to work due to a critical illness, to cover the commercial mortgage, business debts or director’s loan. Purchasing business loan insurance can protect shareholders and ensure the business continues to trade.
Insurance can also help you if you’re the sole owner of a company. Lenders often require owners to secure loans against their own personal assets to help minimise their risk. If an owner passes away and the business debt is personally secured against your asset (traditionally a home) then the lender will likely expect your share of the estate to be paid to them, up to the value of the outstanding debt.
Business loan insurance advice
To understand more about what type of insurance is right for you, it’s important we carry out a thorough fact find and assess your liabilities. This is achieved in a confidential process and you’re made aware of every stage prior to anything happening. We assess the types of loans you have, who remains liable, whether there are personal guarantees and discuss what you would like to happen in the event of a critical illness or owner passing away.
If you need to make a claim against your insurance, then we’ll be here to help. The sum assured can be paid directly to your lender (if permitted) or to your business. If the payment is made directly to your business, you can decide whether to pay the business liabilities in full, or continue to make contractual payments.
Can Our Advisers Help?
Loan Insurance Specialists
We can talk to you about fixed sum assured or decreasing term cover and shareholders, members, directors, partners and sole traders can apply.
For an informal, confidential discussion about your insurance needs, please get in touch.
Frequently Asked Questions - Business Loan Protection
What is business loan insurance?
Business loan insurance, also known as business loan protection or asset protection, is a type of insurance policy that protects the lender’s interest in a business loan. It ensures that the lender receives full payment of the loan amount if the borrower defaults or becomes unable to pay the loan.
Why do lenders require business loan insurance?
Lenders require business loan insurance to mitigate their risk when lending to a business. It ensures that they have a security interest in the loan and can recover their losses if the borrower defaults.
Who is eligible for business loan insurance?
Typically, businesses that have a good credit history, stable financials, and a solid business plan are eligible for business loan insurance. However, the eligibility criteria may vary depending on the lender and the type of insurance policy.
What types of business loan insurance are available?
There are several types of business loan insurance available, including:
- Life insurance: This type of insurance covers the borrower’s life, and the death benefit is used to pay off the loan.
- Disability insurance: This type of insurance covers the borrower’s income in case they become unable to work due to illness or injury.
- Key person insurance: This type of insurance covers the loss of a key employee or owner who is critical to the business.
- Asset protection insurance: This type of insurance covers the value of assets such as equipment, inventory, or property.
How does business loan insurance work?
The process typically works as follows:
- The borrower applies for a business loan and agrees to purchase business loan insurance.
- The lender requires the borrower to provide evidence of the insurance policy.
- The borrower pays premiums for the insurance policy.
- If the borrower defaults or becomes unable to pay the loan, the lender can make a claim on the insurance policy to recover their losses.
What are the benefits of business loan insurance?
The benefits of business loan insurance include:
- Reduced risk for lenders: By providing an additional layer of protection, lenders can reduce their risk of loss if the borrower defaults.
- Increased borrowing power: Business loan insurance can help businesses access more credit by reducing the risk for lenders.
- Peace of mind: Business owners can have peace of mind knowing that their lenders are protected in case they are unable to repay the loan.
Are there any drawbacks to business loan insurance?
Yes, some potential drawbacks to business loan insurance include:
- Higher costs: Business loan insurance can add additional costs to the borrower’s monthly payments.
- Complexity: Business loan insurance policies can be complex and may require specialised knowledge to understand.
- Limited coverage: Some policies may have limitations or exclusions that may not provide adequate coverage in case of default.
Are there any drawbacks to business loan insurance?
Yes, some potential drawbacks to business loan insurance include:
- Higher costs: Business loan insurance can add additional costs to the borrower’s monthly payments.
- Complexity: Business loan insurance policies can be complex and may require specialised knowledge to understand.
- Limited coverage: Some policies may have limitations or exclusions that may not provide adequate coverage in case of default.