What Is Personal Guarantee Insurance?
Personal Guarantee Insurance (PGI) is designed to offer some financial protection if you have provided a personal guarantee for company loans. Intended to offset your personal financial risk by providing cover for a proportion of the amount guaranteed, the availability of this type of insurance can make the decision to offer personal guarantees a little easier for directors.
When signing a personal guarantee, it may feel like there is little risk of it being called upon, but it only takes a problem in your market, or the loss of a key customer, to trigger a downturn in projected sales and incoming cash levels.
Personal guarantees are generally made for a fixed amount but this could easily increase if interest or other costs are added. What may seem like a good method of obtaining loans for the business can quickly turn into a requirement to sell your family home or other important assets.
That's why we provide a personal guarantee insurance service for company directors through our trusted insurance partner. You can obtain an online quotation and even process your order by using this link
(Please see our terms and conditions at the bottom of the page).
If you wish to discuss PG insurance in more detail, we have licensed Insolvency Practitioners across the UK with whom you can arrange a free initial consultation at your local Begbies Traynor office. Take professional advice on the merits or otherwise of making a personal guarantee, and let us help you decide on the best course of action.
What are the benefits of Personal Guarantee Insurance in more detail?
- It allows directors to balance their risk evenly, so that no one director is taking on all the uncertainty of guarantees being called upon in the future
- It can provide the incentive needed to grow the company by borrowing essential monies
- This type of insurance is flexible, and can be increased if necessary as your business grows
- Personal Guarantee Insurance provides peace of mind to directors that the full value of their personal asset is not at risk
- Start-up companies have access to funding that they might not otherwise be comfortable taking on
How much will be covered by PGI?
Cover is often scaled up over a period of time. Initially the cover may be minimal, but will increase to around 90% of the guarantee amount at year five and beyond, with incremental increases in the intervening years.
This policy amount will be based on the level of risk presented to your insurer, for example, the industry in which you operate, your previous history of repayments, and general trading outlook for the future.
The company’s performance and the likelihood of your personal guarantee being called upon by lenders will both come under scrutiny. Insurers will want to make sure that directors have an incentive to ensure the terms of each loan are met, and that the company will do as much as possible to encourage positive cash flow, without removing the element of reassurance when it comes to a director’s personal asset.
The cost of this type of insurance depends on the level of cover required, and the factors mentioned above.
A valuable addition to limited liability
One of the attractions of setting up a limited company is the limited level of liability taken on by directors. Although liability is limited most of the time, there are instances where directors could be required to pay company debts.
As well as allowing greater access to borrowing for limited companies, personal guarantees are attractive to lenders as they offer protection for their money even when the company is under intense creditor pressure. A lower rate of default is also likely on the part of the company.
Begbies Traynor is the UK’s market leader in corporate recovery and can offer professional advice on whether Personal Guarantee Insurance would suit your needs. Just contact a member of our expert team to discuss your situation.
*Terms and Conditions
By clicking this link it will take you to the Quote & Buy website of PGI Cover a trading style of Ratae PGI Ltd an appointed representative of Professional Insurance Agents Limited also t/as Business Insurance 24/7 who are authorised and regulated by the Financial Conduct Authority. Professional insurance agents limited also t/as Business insurance 24/7 will be able to help and quote you on various insurance products – we, Begbies Traynor Group, do not offer advice or services in this area of insurance.