There are many benefits to covering the losses incurred (see our recent blog) when a lender demands payment under a Personal Guarantee following your company’s insolvency. It pays the greater part of the guarantee to the lender, or the limit insured if lower, to protect your personal assets.

But how does it work? And is anything required of you as the insured in order to stay protected? We take a closer look…

What doesn’t Personal Guarantee insurance cover?

Dishonest actions

As you’d expect, you’re required to act reasonably in the way you run your business. Unsurprisingly, claims arising from deliberate, dishonest, fraudulent, or reckless actions are excluded.

Non-compliance

Claims aren’t covered if you don’t follow the insurer’s support desk advice when it’s given to you.

Late notification

Finally, as with other insurance policies, claims must be notified promptly. Late-notified claims, and in particular claims made outside the insurance period stated in the policy schedule, are not covered.

How much does Personal Guarantee insurance pay out?

Sum insured

The basic amount paid is capped at the sum insured minus the insured’s contribution. It’s therefore important to ensure that the limit taken is enough to cover the Personal Guarantee exposure you’re faced with.

Insured’s contribution

With almost every insurance policy, some of the risk must be taken by you. Here, instead of an excess, you’d need to pay a percentage of the sum demanded under the Personal Guarantee.

Outstanding debts

Any remaining debts to the company post-insolvency will be deducted from the claim amount.

Does this insurance cover overseas guarantees?

The policies we’re currently able to source only cover the United Kingdom.

What are my responsibilities?

Mitigate losses

You’re expected to run your business honestly and diligently. So, insurers expect you to take all reasonable steps to ensure the company meets its liabilities and to prevent an unnecessary demand under the Personal Guarantee. Remember, dishonest actions aren’t covered.

Update information

It’s important to keep insurers updated of any material changes to the information, or if you discover anything that’s inaccurate. They can’t protect what they don’t know about.

Follow advice

The insurer-provided advice is there to reduce their risk, and the policies are priced accordingly. You’re therefore obliged to act in accordance with the advice they provide through their support desk.

Notify in a timely manner

Again, claims notification is key. You need to notify the insurer of any relevant events promptly.

Get a Personal Guarantee insurance quote with RiskBox

We source our Personal Guarantee insurance through Purbeck. You can visit their website here to get a free quote. 

Alternatively, if you have any questions before getting started, get in touch with the team at RiskBox today on 0161 533 0411 or info@riskboxuk.com. 

Photo by Sarah Agnew on Unsplash