Loan Protection
Business loan protection insurance will provide funds to repay a loan, commercial mortgage, or a director’s loan if one of the business owners dies or suffers a critical illness.
The full loan or mortgage amount can be protected with life cover, or life and critical illness cover. When a claim is made, the sum assured is either paid to the business or directly to the lender if the policy has been assigned.
Why Loan Protection is needed
Many businesses take out loans to start up a company or to expand their operation. And their ability to repay often rests on a few key people. Insurance helps to pay an outstanding loan if any of those key people were to become critically ill or die.
What Loan Protection covers
Most types of business loan can be protected, including:
- Commercial loans and mortgages
- Venture capital loans
- Director’s loans
- Personal guarantees
Things to consider with Loan Protection
Before arranging business loan protection cover, it’s important to understand each individual’s liability. Under the terms of a loan, owners may be jointly liable, severally liable, or jointly and severally liable for the repayment of the loan.
Once this information is clear, a suitable policy can be set up for anyone responsible for the repayment of the loan. A loan protection policy can be taken out to ensure repayment of a business loan in the event of the death or critical illness of a shareholder, partner, member, director or sole trader.