Business Loan Protection Insurance

Business loan protection is a type of protection insurance that can help companies pay their debts if one of the owners was to pass away. It has helped firms large and small through challenging times, and might even be an essential purchase for your business.

In this guide, you’ll learn how business loan protection works, whether your company needs it and how to get the right advice on this.

The following topics are covered below…

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What is business loan protection insurance?

Business loan protection is a type of insurance companies can buy to help them pay off their debts if the owner, a partner or a director were to die. These products can be used to safeguard various types of commercial debt, including overdrafts, business loans, commercial mortgages and directors’ loans, and the debt covered can be any size.

The bigger the debt, the higher the monthly/annual premiums, but the outstanding amount would usually be repaid in full in the event of the insured person’s death.

In addition to paying out if the insured person passes away, many business loan protection policies include critical illness cover, which means the company’s debts would be paid off if the insured person was unable to work due to contracting a serious illness or health issue that is listed in the terms and conditions of the plan.

Can it include disability insurance?

Yes. It is possible to find a business loan protection policy that will have your company covered if the owner has to leave the firm due to long-term disability. The critical illness cover component that some plans include would, in some instances, extend to this.

Be sure to check the terms and conditions of your plan for its list of exclusions. If you need a policy with bespoke disability coverage, get in touch. The independent financial advisors we work with can search the market on your behalf for a deal that meets your requirements.


Who is covered and who benefits?

Whoever guaranteed the debt is covered by a business loan protection insurance plan. This would usually be the owner, a director or a partner. When a company takes out a commercial loan, the finance provider will usually expect a guarantor to be named on the agreement, and if this person passes away, the debt does not die with them.

If the person who guaranteed the debt dies or is unable to work because of a serious illness listed in the terms of the policy, a business loan protection plan would pay out, so it’s the company itself that benefits by having its debts repaid during challenging times.


Does my company need business loan protection?

Most experts would recommend taking out business loan protection if your company has outstanding debts it would struggle to repay if the owner were to die or fall critically ill. This is especially important if there’s unlikely to be enough assets in the business to settle up.

Many firms would be taking a risk if they have unprotected debts. If the company was to go under as a result of losing its owner, the lender may seek repayment from the guarantor or their estate, putting personal assets (such as their home) at risk. The firm’s assets may also have to be sold off, and in a worst-case scenario, it might even be forced into administration.

If your company is classed as a small-to-medium-sized operation, the risk of having debt and no loan protection is considered even higher. Many smaller companies and start-ups rely on loans to get themselves off the ground, and these firms are usually less well equipped to repay them if they run into trouble.

Unsure whether your business needs loan protection insurance? Get in touch! The independent financial advisors we work with can help you decide what type of business protection would benefit your firm the most and track down the best deals for you.


How do I find the best rates and deals?

Don’t go directly to a provider or use online rates tables. Going direct means only having access to one insurer’s deals and online comparison websites have a habit of giving prominent placement to sponsored products. They aren’t bespoke to you, either.

The exact amount you will pay for business loan insurance will depend on factors including the age and health of the insured person as well as the size of the debt you’re protecting and the length of the term. Policies with critical illness cover included can be significantly more expensive, anywhere between three and five times the cost of life-only plans.

Given how vast the market is and the fact that so many variables can impact the cost of your premiums, the best way to find the most favourable deals is to use an independent financial advisor, like the ones we work with. They are whole-of-market, can offer you bespoke advice and find you the best deals for your business’s needs and circumstances.


Speak to an expert

The advisors we work with are experts in business loan protection and they can offer bespoke advice about safeguarding your company with one of these policies. They will also search the entire market for the best deals and flag up the potential alternatives.

Call 0808 189 0463 or make an enquiry and we’ll introduce you to one of them for a free, no-obligation chat about business loan protection insurance today.

We'll match you with your perfect financial advisor

Save time and money with an expert who specialises in cases like yours

We'll match you with your perfect financial advisor

Save time & money with an expert who specialises in cases like yours.

We’ll match you with your perfect financial advisor – for free.