What is Business Loan Cover?
Business loan protection is similar to personal life insurance taken out to cover a mortgage. In the majority of cases, your client can protect the full amount with life cover, or life and critical illness cover.
Who can use Business Loan Cover?
The owner or director of a business who is taking out loans in order to benefit the company.
Why do I need Business Loan Cover?
It helps as if a business owner dies or suffers a severe illness, lenders may have the right to demand that any outstanding loans are paid back. This could be seriously difficult in short notice and could affect a business’s financial situation. Business Loan Cover provides a lump sum to cover business loans so that it does not have to come from a company’s profits.
How does it work with Owners Loans?
Lending your own money to your business has several advantages with regard to tax and flexibility. However, you might not be aware that in the event of an owner dying these loans are immediately repayable to their estate. This usually means that the business would need to turn to the bank to replace that borrowing. The alternative is that your business could face the possibility of expensive legal action with the deceased’s legal representatives. In this situation, the cover would pay the loans back in a lump sum to avoid this.
How does it work with Bank Loans?
If you have a bank loan, then you need to consider how you would service this loan if you lost a key business owner or manager through death or serious illness. Could you guarantee that the bank would be party to a recovery plan, or would they just recall the overdraft and close the business down? By investing in business loan cover, your business is covered should someone central to the loan dies or gets terminally ill, which will keep your business afloat.
When is the benefit received?
Once the claim has been investigated, the money would go straight to paying back the loans in a lump sum.