How Personal Guarantee Insurance Protects Your Business and Personal Assets

In today’s business landscape, securing finance is essential for growth. However, many lenders require business owners to sign a Personal Guarantee (PG) to access funding. A Personal Guarantee is a legally binding agreement that makes a company director personally liable if the business is unable to repay its debt. While this can be an effective way to secure necessary funding, it also places your personal assets, such as your home, savings, and pension, at serious risk.

This is where Personal Guarantee Insurance (PGI) comes into play. PGI provides protection against the personal financial exposure created by signing a PG, offering peace of mind in case your business runs into difficulties. By working with a trusted insurance provider, you can shield your personal estate from the consequences of business insolvency. Here’s everything you need to know about PGI and how it can benefit you and your business.

What is Personal Guarantee Insurance?

Personal Guarantee Insurance (PGI) is designed to protect business owners and directors from the financial risk associated with signing a PG. If your company becomes insolvent and cannot repay its debts, PGI will cover up to 80% of the outstanding personal guarantee amount, helping to mitigate the potential impact on your personal assets.

By partnering with a specialist provider, businesses can access tailored PGI policies that cover a wide range of loan types, from commercial mortgages to peer-to-peer loans. Whether you are seeking secured or unsecured finance, PGI can be structured to fit your needs, providing flexible protection and valuable support when it’s needed most.

Key Benefits of Personal Guarantee Insurance

1. Coverage of Up to 80%
   One of the most significant benefits of PGI is the coverage it provides. For secured loans, PGI can cover up to 80% of your personal guarantee amount. For unsecured loans, cover starts at 60% in the first year and increases to 80% by year three, offering additional peace of mind over time.
2. Wide Range of Loans
   PGI can be applied to various types of loans, including commercial mortgages, invoice finance, asset-based loans, development loans, and peer-to-peer finance. This flexibility makes it suitable for businesses across different industries, allowing you to focus on growth without worrying about personal liability.
3. Business Support Service
   One unique feature of many PGI policies is the inclusion of a Business Support Service. This service provides unlimited access to expert financial advice, helping business owners navigate periods of financial difficulty. Whether you need advice on restructuring debt or assistance with insolvency procedures, the Business Support Service is there to guide you through tough times.
4. Multiple Directors and Guarantees Covered
   A single PGI policy can cover multiple directors under joint and several liability agreements, ensuring that your entire leadership team is protected without additional costs. Additionally, multiple guarantees can be covered under a single policy, simplifying the process for businesses with complex finance arrangements.
5. Debt Negotiation Support
   In the unfortunate event of financial difficulty, PGI policies often include a provision for debt negotiation support. This typically includes up to £10,000 in cover for a professional debt negotiator to help settle your obligations with lenders, easing the burden on directors during challenging times.

Frequently Asked Questions (FAQs)

Here are some common questions about PGI that can help provide clarity to prospective clients:

• Who provides PGI?
  PGI is typically offered by specialist insurance providers, backed by reputable, A-rated insurers.
• Can I get PGI?
  PGI is available to directors of UK-based Limited Companies or Partners of Limited Liability Partnerships.
• How much can I cover?
  PGI can cover up to £550,000 for secured loans and £400,000 for unsecured loans.
• Can multiple directors be covered?
  Yes, up to five directors can be covered under a single policy if the PG is signed jointly and severally.
• How quickly can I get PGI?
  Once an application is submitted, coverage can often be in place within 24 hours, depending on the complexity of the case and the information provided.

Real-Life Impact: PGI in Action

PGI has already helped many businesses protect their personal assets and navigate financial challenges. Here are two real-life examples of how PGI has made a difference:

1. Business Acquisition and Financial Struggles

A business in the leisure industry, recently acquired via leveraged finance, faced trading difficulties due to external factors such as Brexit and increased competition. With an outstanding PG of £200,000, the business was unable to meet its obligations and entered insolvency. However, thanks to their PGI policy, 80% of the PG was covered, reducing their personal liability and allowing them to negotiate a settlement with the lender.

2. Cash Flow Problems for a Start-up

A trampoline park faced significant cash flow difficulties after securing asset finance to launch the business. Despite good income, profit margins were not enough to cover loan repayments. The business called on the Business Support Service included in their PGI policy, which helped them explore options for refinancing, restructuring, and even sub-letting space to ease financial pressure. Ultimately, the business was able to attract new investment and turn things around, avoiding insolvency altogether.

Conclusion: Protect Your Personal Assets with PGI

If you’re a director who has signed or is considering signing a Personal Guarantee, now is the time to think about protecting your personal assets. PGI provides the security and peace of mind that business owners need to focus on growth, without the fear of losing their personal estate if things don’t go as planned.

For more information or to get a quote, contact us today. Let us help you safeguard what matters most—your home, savings, and future.