Many businesses rely on borrowing, whether that’s a commercial loan, a director’s loan, or a business overdraft. But what happens if the person responsible for repaying that debt dies or becomes critically ill?
Business Loan Protection Insurance is designed to repay outstanding borrowing if a key individual dies or is diagnosed with a serious illness. It protects the business from financial strain, prevents disruption to trading, and can even avoid directors or partners becoming personally liable for company debt.
At Mortgage Knight, we work with company owners, lenders, and accountants to set up smart protection strategies that match the business’s borrowing profile, so if the worst happens, the debt doesn’t outlive the borrower.
A life or life & critical illness policy is taken out on the individual(s) responsible for the debt
If the insured person dies or becomes critically ill, the policy pays out
The payout is used to repay the loan by the business, or by a lender using a legal charge
The business avoids liability, and trading can continue without financial stress
Raj invested £150,000 into his business via a director’s loan. When he passed away, the company owed the money to his estate, but had no cash to repay it. Fortunately, Business Loan Protection was in place, allowing the company to repay the loan without touching working capital.
A construction firm needed a £400,000 loan to expand but the bank required reassurance the loan could be repaid if the MD passed away. A Business Loan Protection policy was taken out on the MD — and the loan was approved.
Ans: Usually, the business owns the policy and is the beneficiary. In some cases (e.g., for director’s loans), it may be held in trust for the estate or family.
Ans: Yes, a single policy can be set up to cover multiple debts, or multiple policies can be used for specific liabilities.
Ans: It’s optional, but highly recommended. If the key person is seriously ill and unable to work, repaying the loan may still be essential.
Ans: You can adjust the policy or reduce the cover to reflect the new exposure — we’ll help manage this as your business evolves.
Ans: In some cases, yes — especially where it protects business liabilities. We’ll liaise with your accountant for the most tax-efficient structure.
Ans: Yes, you can cover one or multiple people depending on who the debt is tied to, either jointly or separately.
Ans: Cover may still be possible — we work with a range of insurers and can explore non-standard underwriting and rated terms.
Whether it’s a commercial loan or a director’s investment, protecting your business liabilities means protecting the business itself.
Speak to Mortgage Knight today, and we’ll help you put the right Business Loan Protection in place, so your company stays in control, no matter what.
