Personal Guarantee Insurance

What you need to know:

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• What is personal guarantee insurance?
• Who sells personal guarantee insurance?
• How can I apply for personal guarantee insurance?

What is a personal guarantee?

A personal guarantee is where a person (typically the business owner) legally agrees to repay the credit that is issued to their business when applying for a loan. So, if the business becomes insolvent and can’t repay the outstanding credit, the person who signed the guarantee will become personally responsible for repaying the debt.

A personal guarantee is used by lenders as an extra form of security, to reduce the amount of money that is paid back. Business owners are willing to take out a personal guarantee as it can make them more likely to receive a loan, but importantly as they want their business to succeed.

The downside of a personal guarantee is that a person who takes on the responsibility of repaying the outstanding debt, risks losing their personal property should they not be able to pay it back.

 

Why do people apply for personal guarantee insurance?

A business owner will usually apply for PG Insurance as it protects the business owner’s assets (up to a certain percentage) should they be liable for debt if their business becomes insolvent. It helps reduce the risk of a business owner losing personal assets, such as a home or car.

PG insurance provides additional security and peace of mind for business owners who are concerned that they’re at risk of losing personal estate should their business become insolvent. 

However, as personal guarantee insurance only covers up to a certain percentage, there is still a chance that the owner is at risk of losing personal property.

 

What type of loan facilities can I use personal guarantee insurance for?

PGI is available against a number of Limited Company borrowings:

• Invoice finance
• Asset based lending
• Commercial finance
• Other secured borrowings
• Unsecured borrowings
• Peer-to-peer loans

Who are Purbeck Insurance Services?

Purbeck Insurance Services is a trading name of Purbeck UK Limited which is a company registered in England and Wales under company number 10345620 and has its registered office at 20 – 22 Wenlock Road, London, N1 7GU Purbeck UK Limited is authorised and regulated by the Financial Conduct Authority. Firm permissions can be obtained from the FCA register. Purbeck UK Limited is a Managing General Agent and has binding authority to enter into and administer contracts of insurance on behalf of Markel International Insurance Company Limited.

 

Where can I receive PG insurance coverage?

Purbeck is only able to provide insurance coverage to businesses based in the United Kingdom of Great Britain and Northern Ireland. If your business does not reside in the specified destination, then you will not be eligible for coverage.

 

What is insured by personal guarantee insurance?

If your company becomes insolvent and you have signed a personal guarantee on a loan facility, personal guarantee insurance covers the cost of that personal guarantee. PG insurance will cover:

• The sum of the personal guarantee demanded by the lender, up to the limits agreed in the insurance policy.
• Your contribution towards the sum insured and any amount you owe the company, as long as this has been declared to and accepted by Purbeck as per the agreement.

The insurance will also include a support desk which can provide advice and assistance in the event of a precautionary or primary notification under the policy.

 

How does Personal Guarantee Insurance work?

Personal guarantee insurance differs depending on whether the finance facility it’s being taken out against is secured or unsecured. This can affect the level of cover that PGI is available to offer. Below we have provided a breakdown of how the insurance works depending on whether it is secured or unsecured.

 

Personal guarantee insurance for unsecured finance.

Unsecured cover works as a fixed percentage of the personal guarantee amount and would progress as follows:

• Year one: 60%
• Year two: 70%
• Year three and thereafter: 80%

 

Personal guarantee insurance for secured finance.

Secured risks work slightly differently. The policy will cover 80% of whatever amount Purbeck agree as settlement on behalf of the policyholder with the lender, up to 80% of the guarantee amount. For example:

• £100,000 personal guarantee
• Purbeck agree a settlement of £50,000 with the lender
• Purbeck pay £40,000 and the policyholder pays £10,000

The annual premium is calculated based on the applicant circumstances and the individual requirements of the applicant. Successful applicants will have a choice to pay the premium upfront in full or via a monthly direct debit instalment facility.

What do I need to apply for personal guarantee insurance?

To apply for personal guarantee insurance you will need to provide some basic details for eligibility purposes. The details you will need to provide include:

• Personal Details: Personal information, house address, and contact details.
• Company details: Company name, company address, and company history.
• Financing facility and cover details: Name of lender, value of loan, personal guarantee insurance required, and insurance planning information.

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