Business loan protection is designed to provide a business with the funds to repay commercial loans or mortgages should one of the business owners suffer a critical illness or death.
You can protect the full value of the loan or mortgage and payment is usually made to the business.
It is essentially a life-insurance policy with critical illness included, specifically designed to cover business loans and commercial mortgages.
Paid to the business or directly to the lender
‘Decreasing cover’ or ‘level cover’ options available
Protects your businesses cash-flow
The Alan Boswell Group Difference
Insurance for your building is often considered a ‘must have’ but many risks are less obvious and should seriously be considered as your business grows and develops. Business protections policies tend to be considered under financial services rather than insurance as they are designed to cover the loss of personnel or monies – similar to a life insurance policy and includes shareholder protection, loan protection and key person cover.
Alan Boswell Group can provide advice on the full suite of business protection policies available to you and your business.
Business Loan Protection in detail
If a business owner dies, or suffers a severe or critical illness, lenders may have the right to demand that any loans or mortgages are paid back. This could represent a significant risk to business continuity and so it may be wise to protect the business by putting in place a business loan protection policy.
Similar to a personal life insurance policy it is designed to pay out to the value of the loan providing the company with the funds to repay the loan.
It can be used to settle loans made by the business owners to the business, not just from established lenders, such as banks.
Considering that some business loans may include personal liability this is a crucial insurance to protect individual directors from any potential loss
FAQs
Business loan insurance provides a company with a lump sum to repay business loans or mortgages if one of the business’ owners, who are often critical to repayment of company debts, suffers a critical or terminal illness or dies. If a claim is made the funds would either be paid to the business, or the loan provider direct.
Business loan insurance can be taken out on either a ‘level cover’ or ‘decreasing cover’ basis.
Decreasing cover premiums fall in line with the repayment of the loan itself, so as the loan is paid off, the level of business loan insurance will also fall accordingly.
Level cover is normally used for interest-only loans and ensures that the insurance covers the outstanding debt until it is repaid in full at the end of the loan term.
If you’re looking to take out an insurance protection policy for your business loans it is best to discuss your options with an adviser. They will be able to assess the level of debt the business has, the ability for it to be repaid should an owner be unable to work due to critical illness or death, and the level and type of protection you will need.
No, business loan insurance premiums are not normally tax deductible. This is because it is the lender that directly benefits from the policy, not the business. Therefore, it is not considered to be ‘wholly and exclusively’ for the business.
No, business loan insurance is not compulsory in the UK. However, for businesses that heavily rely on business owners or shareholders to be able to meet the repayments of outstanding debts, it is worth considering. Especially if any of these loans have personal guarantees which could leave members of the business financially vulnerable should the business no longer be able to meet the loan repayments.
Group personal accident insurance provides an instant tax-free cash payment in the event of death, disablement or loss of hearing/sight/ speech following an accident.
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