Most businesses borrow money. Your business may have a loan, a director loan account, a commercial mortgage or an overdraft and these are usually ‘secured’; guaranteed by someone against something.
But would you be able to repay the loan if you suddenly had to? If a co-owner or key person within your business had arranged the loan it could be a significant problem. Director loan accounts usually have to be paid off on death. Loans and mortgages may have been secured against an individual’s home or property and in the event of their death, their estate would become liable. In fact, such is the risk of default, many lenders make protecting a loan a condition of their offering it.
Liability Protection can provide this protection. There are a number of ways of taking it out such as a decreasing term insurance policy or a life assurance or life assurance and critical illness policy against a key person or director. In the event of the director or borrower’s death, compensation from the policy can help pay off the loan or debt.
It’s all a matter of risk management.