Updated: February 21, 2020

Business Loan Protection Insurance

Worried about the impact on your business if an owner passes away unexpectedly? Business loan protection insurance could provide the answer - read on to find out more

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Richard Angliss

Author: Richard Angliss - Finance Expert

Updated: February 21, 2020

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.

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.

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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.

Ask a quick question

We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in business protection insurance. Ask us a question and we'll get the best expert to help.

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Richard Angliss

Richard Angliss

Finance Expert

About the author

Richard Angliss has made a career in financial services which stretches over 40 years.

His early career was spent learning about the various financial products and applying them to prudent advice, working for one of the largest life assurance and investment firms. After that he joined the financial services arm of a very well-known firm providing independent advice to their 8 million customers.

For the last 20 years he has been involved in building software solutions that help Advisers and clients work together to achieve good financial outcomes and helping to set up three independent advisory firms. He also has written many articles for financial services publications and provided commentary for newspaper journalists.

At an early stage in his career he realised the great satisfaction that comes with being able to help people achieve their goals and protect their families. “Regulation of financial services has hugely impacted on ensuring people get appropriate advice. The issue these days is access to that advice and just as importantly regular reviews to make sure that everything stays on track”.

With the growing development of online resources such as Online Money Advisor he sees a great future for people to access advice to make their pension and investment work harder for them.  Plus, of course, to ensure they have insurance products in place that will be required when unforeseen events happen.

He knows getting that balance right is crucial to prudent financial planning and the wellbeing of individuals and their families.

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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