Business Loan Protection
The unexpected death or the critical illness of a business owner can have dire consequences for existing loans that the business might have. The business’ ability to repay any borrowed money could be at risk if a key partner in that business passes away – which is why every business should consider business loan protection.
Why should I take out business loan protection?
Many lenders make it a condition of loan arrangements – just as personal life insurance is taken out alongside a new mortgage. Here’s a little more about how business loan protection works, and why it’s imperative in today’s financial climate. As well as securing the future of your business should one of the owners or directors die, business loan protection can be crucial for the guarantor of the loan. Should those liable be unable to pay, they may have to turn to their own personal finances in order to meet the repayments.
What types of loan can I protect with this cover?
Many different types of business loan can be protected with this insurance, from venture capital loans and personal guarantees to commercial loans and mortgages.
Setting up business loan protection
First, it’s important to consider the terms of the business loans being taken out. Owners may be jointly or severally liable for the repayment of the loan, and it’s important to have an understanding of each director’s liability before looking at loan protection.
Once you’ve gained this insight, you can set up a policy for each person who has guaranteed repayment of the loan. The term of the cover will need to match the term of the loan, and the policy can be owned by the business or by an individual business owner.
Should a business owner die while they’re covered by the policy, the proceeds are paid to the policy owner, who can pay off the loan straight away or use the money to fund the regular repayments as originally agreed. It’s also possible to assign the policy directly to the lender, to cut out the middleman and ensure the money goes directly to them.
Taxation of business loan protection
The premiums on these policies are most often paid by the business – but they don’t qualify as a deductible business expense. If you need impartial advice on the taxation of business loan protection, talk to our team, who can provide assistance.