What Is Personal Guarantee Insurance?

What Is Personal Guarantee Insurance?
Opt for Personal Guarantee Insurance that covers up to 80% of your risk to actively safeguard your
business interests. Thus, you get to know What Is Personal Guarantee Insurance? And what are its
exclusions, features and merits?
Personal Guarantee Insurance (PGI) is a type of insurance that is famed to provide protection for personal
assets to small-to-medium-sized business owners and commercial real estate investors. It is only
provided when they sign a personal guarantee for a commercial loan.
Therefore, Personal Guarantee Insurance provides insurance cover for only those who have signed a
Personal Guarantee on a new, or current loan.
What is a Personal Guarantee?
Starting with the introduction of personal guarantee insurance, personal risks are managed in business
and personal guarantee insurance acts as a guarantee that personal assets will not be used to cover the
loss if their business fails. Therefore, offering the directors moderation.

Features of Personal Guarantee Insurance (PGI):
Annual Insurance Policy is offered by personal insurance.
The price of personal guarantee insurance is formed by individual circumstances. moreover, the risk involved also
hampers the prices.
The Prices fluctuate as we buy the policy.
The insurance policy is issued within six months of a loan origination
It is delimited by the FCA
Personal guarantee adds up to the cost of an overall loan transaction
It may offer you a more attractive interest rate on the loan
This option is usually available to the directors of limited personal guarantee insurance companies, or to the partners
of an LLP
It is offered for personal guarantees which are taken against both secured and unsecured loans
It is typically to be an underwritten based
There is a fixed percentage of the amount guaranteed associated with the policy.
You Can even insure multiple guarantors and that too on a single policy
Exclusions of Personal Guarantee Insurance (PGI):
What all is not covered in the personal insurance policy is depicted here. Moreover, if you have read the
summary of the policy these points are also mentioned in the insurance policy. Therefore, Personal
Guarantee Insurance Exclusions:
The uncertainty involved when you were aware of a potential bankruptcy event which is held either before or at the
time of taking out the insurance cover

In case you are involved in any dishonest or fraudulent behavior, where a personal guarantee is called
Whether the personal guarantee is enclosed by any other insurance
Where the guidance of the insurance support is not represented upon the following of any Notification
What is Covered in Personal Guarantee Insurance (PGI)?
The insurance covers 60 Percent during the first year of cover. And this rises to up to 80 Percent as the
business proves its stability and the risk with time. 80 Percent is the maximum available cover.
Advantages of Personal Guarantee Insurance
Opting for personal guarantee insurance means that risk involved can be minimized. Agreements formed
are usually to breach the corporate veil which indirectly indicates no separation between personal and
private money. As, a result of which the insolvency rate is minimized or becomes nil. It also gives personal
guarantors a substantial piece of mind as they are safe in buying the personal guarantee insurance and
putting their house on the line.
Minimised risk
Newer personal guarantee insurance products
One or multiple guarantors

Annual premium
Covers up to 80 Percent of the total
Family assets are not threatened
Who Pays the Personal Guarantee Insurance Premium?
Covering the term commercial finance, directors while opting for Personal Guarantee Insurance are
concerned that maybe they have to pay the premium by themselves, but the costs can be covered by the
business.
How Much Does Personal Guarantee Insurance Cost?
The cost of personal guarantee insurance is typically based on several factors which can be summed up
as follows:
Guarantee period
The financial situation
Stability of the company
Loan transaction
The overall level of risk to the insurer

The timeframes
As the price of personal guarantee insurance Premium varies from £750 per year, up to around
£12,000 for the biggest guarantees.
Types of Personal Guarantees
Now that we are aware of what is personal guarantee let’s take a look at the types of personal guarantees.,
which are covers two types of personal guarantee that areas:
1. Unlimited Personal Guarantees
In the case of Unlimited Personal Guarantee the lender can recover up to 100 Percent of the total loan
amount. Moreover, apart from the loan amount he can also recover any associated legal fees with the loan
amount.
The lender can even hire lawyers in case you fail to make the payment due. Thus, all your savings and
funds such as your life savings or even your retirement or else your kid’s college fund, your own house,

your owned car, and any other assets which the company find useful in repaying the loan amount are
utilised by them in order to cover the entire associated cost of the loan with interest as well as the legal
fees involved.
These Personal Guarantees are called unlimited as they do offer you zero financial protection in case you
fail, or your plan or business fails.
2. Limited Personal Guarantees
Contrary to the other comes limited personal guarantees that set the limit on what can be collected or
covered from you in case you fail, or your plan or business fails.
This type of personal guarantee is issued when more than one person is involved in a business. Thus, a clear
percentage of debt sharing ratio is also discussed between them. Further, their limited guarantee can be
classified into two parts:
Several guarantees
Joint and several guarantees.
In several guarantees, each person has a predetermined percentage of liability. That is usually a fixed
percentage of the loan, which is equivalent to the personal stake in the company. Whereas, a joint and
several guarantees, says that each party is potentially liable for the full amount of debt. Therefore, in this,
the lender can seek out the full sum of the loan amount from any of the parties.
How to Limit a Personal Guarantee?
Eliminating the need for personal guarantee insurance is quite difficult as insurance has nowadays become
a specific need for the people. Thus, we cannot eliminate it but surely can reduce or limit its impact for
this some points are worth considering:
Limit a guarantee
Modify the reporting requirements
Eliminate certain assets
Do not include the spouse as a guarantor.
Acquire personal guarantee insurance
Avoid “joint and several” language
Suggest terms of relief
Decrease guarantee
Improved business performance
How does Personal Guarantee Insurance Work?
Personal guarantee insurance works to protect you from this risk associated in case your business fails.
But what is to be considered here are some points on which Personal guarantee insurance or PGI works:

Annual premium which is calculated on individual circumstances
You choose the amount to be insured
Cover starts from 60 Percent of the guarantee
More than one director can be covered under one premium
Works well when directors have different levels of shares
Involve significant costs if called upon
Personal Guarantee Forms for Loan
Personal Guarantee Form is a document that enables a guarantor, to take charge for a personal loan of
the borrower in case it is not paid back. With the high risks involved nowadays, by unsecured loans, the
role of a guarantor is enhanced.
Here, the guarantor insurance definition depicts that the guarantor puts his assets as a guarantee
indicating to guarantee the loan. And in case the loan amount is not met, the guarantor assets are taken
up to cover the loan amount.
Thus, here Personal Guarantee Form is filled up by the guarantor and allowing his consent to do so.
Contents of a Personal Loan Guarantee Form
The form signed by the guarantor holds many specific things mentioned that are outlined as:
The loan balance
Specifying the place, the loan originated
Clarify its legal context
Explicit provisions of the loan
Parties involved and their addresses.
Signed
Authenticated, and dated
While the issuance of the contract or insurance a copy of personal loan guarantee form is also attached
to the insurance and a copy of the form is to be handed to each person involved.
Commercial Lease Personal Guarantee Insurance
Landlords do carry risk when they rent out their commercial space. Here arises the need for a commercial
lease personal guarantee.
So, in case if you default on your lease you are now individually liable for the remaining balance of the
rent but this could be eased with the help of a personal guarantee. Where personal guarantee insurance
providers would cover all your lease amount.

Tips to Get Out of a Personal Guarantee
We have suggested some points that would help you to lessen the burden of a Personal Guarantee:
Consult with an attorney
Ask for an amendment
Proof of consistent revenues and profits
Renegotiate the guarantee terms
Proposal to prepay
Compromise to set up a letter of credit
Give a security deposit
Conclusion
Before getting personal finance insurance one should note down their business and finances, as despite
the best efforts involved business could fail, so in that scenario, one should be ready for the assets they
are offering for guarantee. Thus, do consider the option of Personal Guarantee Insurance to safeguard
yourself from the risk involved in the near future.