Personal Guarantee Insurance (PGI)


A personal assurance is a typical necessity in business dealings, particularly for SMEs (small and medium-sized enterprises).

If there is a situation of insolvency, which encompasses bankruptcy and the loss of personal assets, it also puts the guarantor at substantial financial hazards, whereas a personal assurance can aid in obtaining financing or advantageous credit conditions. Assuming personal responsibility for the business’s debts or obligations, typically by a director, it entails a pledge undertaken by an individual.

Many businesses and individuals are unaware of the existence or benefits of insurance, but it is a solution that provides personal guarantee against these risks.

This article will delve into how to obtain and who needs it, how it works, its definition, and also explore the importance of personal insurance guarantee in protecting your personal assets from corporate insolvency.

Personal guarantee insurance is a type of insurance that typically protects an individual, who is the owner of a business, that has provided a personal guarantee for a business transaction or loan, against any losses incurred by the borrower if they default on the loan. This insurance policy provides coverage for the losses incurred by the guarantor.

In case of default, the insurance policy will cover the total sum due, including any accrued interest, attorney fees, and other expenses related to the debt.

Insurance can provide business owners who may be hesitant to guarantee personal financial risks with peace of mind.

What are the Key Features of Personal Guarantee Insurance?

  • Yearly Insurance Plan.
  • Prices fluctuate based on individual situations and the degree of uncertainty.
  • The Financial Conduct Authority (FCA) regulates this form of insurance.
  • Insurance is accessible to the executives of limited firms, or associates of an LLP.
  • Can be provided for personal assurances obtained against both secured and unsecured advances.
  • The premium is determined by a set percentage of the guaranteed sum.
  • It is possible to ensure multiple sponsors on a single policy.
  • How Much is Covered

    The insurance usually covers a lower percentage, for example, 60%, during the first year. After several years, the coverage gradually increases up to 80%.

    How much does personal guarantee insurance cost?

    The cost of personal insurance guarantee varies depending on how the level of overall risk and the timeframes involved are insured, as assets are being used as security and depending on what the guarantee is.

    Prices range from approximately £750 per annum to 12,000 for the largest assurances.

    How to Apply for Personal Guarantee Insurance?

    Getting started with Purbecks is a straightforward and uncomplicated procedure when applying for personal guarantee insurance. Here’s how to begin:

  • To ensure that you receive a personal guarantee, including the amount, the online form requires you to provide some basic information about your business. You can start the process by visiting Purbecks’ website and completing the online application form. To begin the process, visit Purbecks’ website and complete the online application form: Apply online.
  • Once you have provided the policy’s terms and conditions, which include the extent of coverage, you will be given a comprehensive quote that specifically outlines your personal situation and needs. Purbecks will assess your yearly insurance premium after you have submitted your application. Obtain a quote:
  • This means that you will need to renew your policy every year in order to maintain coverage.
  • The level of cover provided by Purbecks is determined based on individual circumstances and is guaranteed to cover a specified amount, up to an agreed-upon percentage. The personal guarantee is based on a fixed percentage.
  • If your personal guarantee is enforced and your business becomes insolvent, Purbecks will provide support. The policy will cover the total amount owed, which includes interest, legal fees, and any additional expenses related to the debt, in the event of insolvency protection.
  • Exclusions

    These are thoroughly discussed in the policy overview you will receive. Some of the main exceptions to your insurance coverage include:.

  • If you were conscious of a potential bankruptcy occurrence either prior to or at the moment of obtaining the insurance coverage.
  • When a personal assurance is invoked for deceitful or deceptive conduct.
  • If the personal assurance is protected by any additional insurance.
  • When the guidance from the insurance assistance is not followed after receiving a notification.
  • Insurance Criteria

    The insurance is accessible to directors of limited companies or partners of partnerships within the United Kingdom.

    Can My Company Pay?

    Yes, the expenses of the insurance can decrease for the limited company that requires the personal guarantee since the financing is intended for the limited company.

    This makes personal guarantee insurance even more beneficial for directors as it does not affect their personal finances.

    Should I take out Personal Guarantee Insurance?

    The personal consequences of this situation are usually quite limited, albeit stressful, due to the restricted company structure. We, as insolvency practitioners, handle directors who are experiencing financial crises on a daily basis. Business debt does not impact family finances since the law prevents directors from losing their company.

    These agreements are specifically designed to breach the corporate veil, which means they no longer apply to the separation of personal and private money. However, when a personal guarantee has been signed, this changes everything.

    Additionally, numerous directors of the liquidation company have experienced personal bankruptcy, and it could be even more noteworthy that insolvency suddenly emerges as a consequential outcome.

    Anyone contemplating endorsing a personal assurance for corporate funding should thoroughly contemplate it, and we view it as a wise choice. All of this can be avoided with insurance for personal guarantees.