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Personal Guarantee Insurance

Our clients are often surprised to hear that they can take out insurance against the risk of having to pay out on a claim made against a personal guarantee that they may have given.

One of the attractions to directors in setting up a limited company is the limited level of liability. Although liability is generally limited to the extent of their shareholding, there are instances where directors could be required to pay their company’s debts. Most lenders who lend to a limited company will ask for a personal guarantee (PG) this may be capped by the lender or an unlimited guarantee depending on the specific lenders standard terms and conditions.

A personal guarantee gives the lender additional comfort by acting as a further form of security and aids in focusing the director(s) attention to provide every assistance to the lender (and their agents) in order to prevent this being called upon in the event of a termination event (i.e insolvency).

Simply click on the following link which will take you directly to our quote screen1.

1) 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 this insurance product we do not offer advice or services in this area of Insurance.

The director(s) agree to act as guarantor for the borrowing in the event that the company is unable to meet its obligations. For most directors a PG will be the biggest liability they have when it comes to their company.

Some advisors may say to company directors that they should never give a personal guarantee. However there are a number of reasons why lenders request them such as:• Statistically loans with a PG have a lower rate of default.• The company cannot be wound up and the loan written off without the liability remaining with the directors.

When signing a personal guarantee it may feel like there is little risk (as you have every confidence in your business and your business acumen), and for the most part they are not called upon. However it only takes a problem in the company’s marketplace, the loss of a key customer or a bad debt to trigger a potential problem for the company.

Ideally every director would like to avoid providing a PG however in order to raise the required finance this is often simply not an option. This can lead to additional stress for the guarantor and have potentially damaging implications personally (i.e. if called upon it could lead to the sale of an asset or even the family home).

You would never enter into business with the belief that it is going to fail, however it is a fact of life that circumstances sometimes arise outside of your control making the failure of your business unavoidable. Having an insurance policy in place from the outset will help with those sleepless nights and can mitigate against any potential personal exposure.

Through our preferred supplier, PGI Cover, My Invoice can provide you with an option to insure against your personal guarantee liability. Personal Guarantee Insurance (PGI) offers some financial protection if you have provided a personal guarantee for company loans.

  • What are the benefits of Personal Guarantee Insurance (PGI)?

    • Provides peace of mind to directors that the full value of their personal assets are not at risk should the guarantee be called upon
    • It allows directors to spread their risk evenly with no one director taking on all the uncertainty of guarantees being called upon
    • Gives access to funding that you might not otherwise be comfortable taking on
    • Cover is flexible and can be increased in line with further borrowing as the business grows.

  • How much can I cover?

    Cover is provided on in increasing scale from 50% to 90%
    First 3 Months 0% – no cover period for the first 3 months
    Next 12 Months 50%
    Year 2 60%
    Year 3 70%
    Year 4 80%
    Year 5 onwards 90%

  • How much will it cost?

    The level of cover and cost is based on the level of risk to the insurer, for example, the industry sector in which you operate and previous history of repayments. The company’s performance and the likelihood of the personal guarantee being called upon by the funder will form part of the insurers underwriting criteria.