Is business loan protection compulsory?

We have taken out a sizeable business loan and I am wondering whether it is mandatory or just best practice to protect the outstanding debt?

Question asked by Claire Cook
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Answered by Tom Conner

Many thanks for your question. Many banks will require business loan insurance (usually in the form of a keyman life insurance policy) before agreeing to make a business loan. Essentially they want to make sure their loan can be repaid if you pass away.

Although some banks are very strict on this there is sometimes room for negotiation. For example, they may start off by saying that you need to be covered for life insurance and critical illness cover but then concede to just requiring life insurance (this would take about 75% off the premium). Also, they may start off by saying that every director needs to be covered for the full loan amount but I know of some banks that have then conceded to allow the sum to be split between the directors. With some banks it seems to work on a case by case basis.

I hope that helps. Please feel free take get in touch for quotes or further information.

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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