Do I Need Commercial Debt Insurance? | Spectrum Financial Advice
Date: 21 November 2017 Author: Lewis Cable
Do I Need Commercial Debt Insurance?

Do I Need Commercial Debt Insurance?

Many company owners are unsure as to whether they should take out some form of insurance to protect outstanding commercial debts. Here’s who should have commercial debt insurance – and why.

Commercial Debt Insurance

Commercial Debts

Let’s begin by looking at what commercial debts are. Commercial debts include any commercial mortgages, business development loans, other asset finance and overdraft facilities. As a rule, these outstanding loans/debts are secured against company owners, directors/shareholders or other key personnel within the company.

Unprotected Commercial Debts

Imagine, for a moment, what would happen if one of the key people against whom your loans are secured was to die or (if relevant cover is selected) become critically ill. Lenders frequently demand repayment of outstanding loans in full upon the death/critical illness diagnosis of a guarantor. Unless your company has the financial resources to make such immediate repayments easily, this could place a substantial financial burden onto your company at a time when the loss of a key individual may already be putting your business’ future at risk.

Commercial Debt Insurance

Commercial debt, or business loan insurance, is designed to prevent the unexpected death/critical illness of guarantors from having a detrimental impact on your business’ financial security. It does so by paying out a pre-determined lump sum upon the death/critical illness diagnosis of an insured guarantor. Your company can then use this lump sum to pay outstanding debts and (depending on the selected level of cover) perhaps even cover some of the costs incurred by the need to replace the deceased/critically ill key individual (i.e. finding/training a suitable replacement employee).

Who Needs Commercial Debt Insurance?

Considering the potential consequences of having to make full repayment upon the death of a guarantor, it is imperative for every company with outstanding business liabilities to have commercial debt insurance. We have more information on Commercial Debt Insurance.

Get Advice

With years of experience in helping companies obtain the right kind and level of business loan protection insurance, we can help you protect your business, too. Get more information and helpful advice by calling us on 01279 315 013, e-mail us at info@spectrumfa.co.uk or use our contact form to arrange your no-obligation review.

 

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