Personal Guarantee Insurance

Personal Guarantee Insurance (PGI) is designed to protect a director's or business owner's assets in cases where they have signed a personal guarantee for a business loan and the business is unable to repay it. 

This type of insurance shifts part of the financial burden associated with personal guarantees from the director to the insurance provider and this works on a co-insurance basis. PGI policies can cover a range of finance types, including secured loans, unsecured loans, asset finance, commercial mortgages, business credit cards and overdrafts.

By holding a PGI policy, business owners and directors have a safeguard that covers a percentage of the personal guarantee amount based on factors like loan type (whether it’s secured or unsecured) and the length of time the policy has been held. 

This financial protection can be crucial for directors and SME owners in high-risk sectors, allowing them to focus on business growth without the constant worry of personal financial loss.

PGI is valuable for any business owner or director who has personally guaranteed a loan, particularly those operating in high-risk industries or SMEs seeking finance. 

Directors' guarantees are common in business lending, and PGI serves as a safety net for directors who have put their personal assets on the line for their business.

PGI offers tailored protection based on the type of loan. For secured loans, PGI provides coverage of up to 80% of the personal guarantee amount, while for unsecured loans, the coverage increases progressively over time, starting at 60% in the first year, rising to 70% in the second year, and reaching up to 80% from the third year onward.

This incremental approach ensures that directors and SME owners benefit from expanding protection as their loan matures. The maximum protection available under PGI is £550,000 for secured loans and £400,000 for unsecured loans. 

The premium for a PGI policy is calculated as a percentage of the full amount of the personal guarantee. Premium rates typically range from 1.6% to 5.20% annually. The exact rate depends on various factors, including the business’s sector, its credit score, the type of loan (secured or unsecured), the lender’s requirements, and the applicable Insurance Premium Tax (IPT). 

By factoring in these elements, PGI providers tailor the policy to the unique needs of each director or business owner, ensuring an appropriate level of protection.

We can include multiple guarantees on your Policy if you have two or more guarantees in place.

Personal Guarantee Insurance is available for personal guarantees provided by directors of limited companies or partners of limited liability partnerships located in the United Kingdom.

Personal Guarantee Insurance is available against Personal Guarantees provided against a wide range of business loans, including both secured loans and unsecured loans.

A secured loan is where the lender has taken security in the form of your company’s assets. They have a contractual right of recovery over your assets in the event that you cannot pay your debts. 

Secured loans include:

• Asset finance
• Commercial mortgages
• Invoice finance
• Qualifying peer to peer loans

An unsecured loan is where the personal guarantee and any associated charges over personal assets are the only security the lender has taken.

Unsecured loans include:

• Credit cards
• Overdrafts
• Peer to peer loans
• Short-term working capital loans

We are at your side and here to help.

Your business may at any time suffer from any one of a number of financial or trading difficulties. It is important that we are notified as soon as you become aware of any of these - we call them “notifiable events”.

You need to read your policy carefully to ensure you are aware of all such situations, some examples of notifiable events include:

• You intend to meet with a licensed insolvency practitioner
• You have default on the loan agreement with the lender
• You have reason to believe that the business will enter an insolvency procedure

When you make us aware of a notifiable event we will introduce you to our Business Support Services.

It is in our best interests to support you with any financial issues your business faces. We are committed to working with you to ensure that your business continues to be successful.

The Business Support Service may help you by introducing you to specialist companies in:

• Business recovery
• Cash flow management
• Credit control management
• Tax credit and deduction advice including R&D and Capital Allowances
• Debt management
• Financial restructuring
• Invoice disputes

The Business Support Service is available to you and not just following a notifiable event. Purbeck receive no incentives for introducing you to these services. We believe they will help strengthen your business and they are businesses we trust.

The annual renewal process is simple and straightforward, enabling you to focus on your business. By renewing your annual Personal Guarantee Insurance policy, you will ensure that the cover remains in place across the duration of the financial commitments.

45 days prior to renewal, you will be provided with an email link to renew your application. You will be asked to confirm your original application details and apply for renewal.

Please note, renewal of your policy will be subject to your circumstances at that time and the insurance may be subject to periodic change.

You will have the opportunity to review the Policy Summary and Key Facts Information prior to purchasing Personal Guarantee Insurance. These documents set out the significant features, exclusion and important information relating to the Policy.

If you wish to review the documentation before you apply, please follow the relevant links below:

• Read the Policy Summary
• Read the Key Facts Information