What is personal guarantee insurance?

• Cover

PGI will cover a percentage of the personal guarantee, which can range from 60% to 80% or even more, depending on the specific policy terms. If the business defaults, the insurance will pay back this portion of the debt, leaving the guarantor responsible for the balance.

• Flexibility

Some PGI policies might allow for increases in coverage (the percentage the policy will pay out) as the business continues to repay its loan and reduce its debt.

• Cost

The cost of PGI will vary depending on the sum insured, the nature and financial health of the business, and the credit rating of the guarantor.

• Making a claim

PGI is not a simple way to walk away from debt. Certain conditions must be met before a claim is paid. For example, the policy might demand that the business must be declared insolvent before a claim can be considered.

• Benefit to lenders

PGI is primarily taken out to protect the business owners, but it can also provide some assurance to lenders, as it adds extra security to the loan.

• Limitations and exclusions

No insurance policy covers everything, PGI will have certain exclusions and limitations. It is important to read your policy carefully and to understand what’s covered and what’s not.