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How to Avoid Bankruptcy With Personal Guarantee Insurance

Posted 10 months ago

How to Avoid Bankruptcy With Personal Guarantee Insurance
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As Nextfin recently reported, small businesses are increasingly being asked for personal guarantees in order to secure finance for their business. According to a survey conducted by Purbeck Insurance Services, 47% of commercial finance brokers reported a rise in demand for personal guarantees in the past year. 

In this guide, we look at the role of Personal Guarantee Insurance, and how it can protect your business against potential bankruptcy. 

What is Personal Guarantee Insurance?

Signing a personal guarantee is a significant stage in the application process for a business loan. As soon as you put your name on the dotted line, you are personally responsible if your business is unable to repay a debt. In essence, if a claim is made under the guarantee, you will be liable to pay the debt with your personal assets potentially at risk. 

This is where Personal Guarantee Insurance (PGI) comes in. Providing cover for individuals who have given a Personal Guarantee to secure a loan, PGI is often used for new finance applications or for existing loans. 

Insurance plans can be tailored to each guarantor, allowing you to determine how much you want to insure and who is noted on the policy. 

Personal Guarantee Insurance can help to reduce the risk placed on your assets, allowing you to run your business in the knowledge that should you encounter financial difficulties, you will be covered. 

The features of Personal Guarantee Insurance include:

  • an annual insurance policy
  • prices that vary depending on individual circumstances and risk level
  • regulation by the Financial Conduct Authority
  • directors of limited companies and/or partners of an LLP can qualify
  • the policy is based on a fixed percentage of the amount guaranteed
  • multiple guarantors can be named on a policy

How does it work?

Applying for the insurance is done via a simple online form. The level of cover available will differ, depending on whether your personal guarantee is against a secured or an unsecured loan. Once you’ve submitted the application, the insurers will assess your circumstances and provide you with a policy to review.

How much does it cost?

The cost of personal guarantee insurance varies depending on how the size of the guarantee, the assets that are being used as security, the timeframes involved, and the overall level of risk to the insurer.

Prices vary from around £750 p.a. to 12,000 for the largest guarantees. Importantly, the cost of the insurance can be listed as a company expense if the personal guarantee insurance covers the company itself. 

Authors: Oliver Murphy & Sacha Bright


Nextfin is not a regulated insurance broker or provider, and this article is meant solely for information purposes and should not be considered advice. You must seek professional advice before proceeding with any insurance product. 

Tagged: sme alternative finance guide entrepreneur

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