This is a question we get asked more than any other, and rightly so.
If you’re a Canadian director weighing up whether personal guarantee insurance is right for you, you’ll find all the information you need right here to make an informed decision.
The short answer
Our personal guarantee insurance coverage protects up to 80% of the personal liability you take on when you sign a guarantee against a wide range of business loans, with built-in business support that starts the day your policy begins.
Secured loan facilities we cover include:
- Asset finance
- Commercial mortgages
- Invoice finance
- Qualifying peer-to-peer loans
Unsecured loan facilities we cover include:
- Business credit cards
- Overdrafts
- Peer-to-peer loans
- Short-term working capital loans
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What does “up to 80%” mean?
Our policies cover up to 80% of the personal guarantee you have signed. If your business becomes insolvent and the lender calls in the guarantee, the policy pays out a percentage of the amount owed, with you covering the remainder. This is known as a co-insurance basis, and it is the same model used across most specialist financial protection products.
The 80% does not apply uniformly. Our insurance applied differently depending on whether the underlying loan is secured or unsecured:
- Secured loans are covered up to 80% from day one of the policy.
- Unsecured loans are covered on a graduated basis: 60% in year one, 70% in year two, and 80% from year three onwards.
This is because unsecured lending carries more risk for the insurer, so cover builds with the relationship. By the time most directors reach the third or fourth year of a long-term commitment, the full 80% protection is in place.
Maximum cover levels align with the size of the personal guarantee being insured and are confirmed during underwriting. If you have a particularly large guarantee, the right place to find out what is available is with our underwriting team.
Directors rarely have just one loan, and businesses rarely have just one decision-maker. If you have two or more personal guarantees in place, whether against the same lender or different ones, we can include all of them on a single policy. Where a guarantee has been signed by two or more directors jointly and severally, we can include all named guarantors on the same policy.
How can you tell if you’ve got an unsecured loan?
If you are not sure which category your specific facility falls into, our underwriters can help. The simple test: if the lender has taken security over your company's assets, the loan is secured. If your personal guarantee is the only security they hold, it is unsecured.
In addition, loans under the Canada Small Business Financing Program (CSBFP) are covered. Under the program, lenders routinely require a personal guarantee starting at 25% of the loan amount.
What’s not covered?
There are a handful of guarantees we will not insure. The most important ones to be aware of are:
- Guarantees relating to businesses that were already insolvent at the time the policy was taken out
- Guarantees called in due to fraud or deliberate default
- Claims made outside the policy period
- Losses related to criminal penalties or fines
The policy exists to protect directors from the consequences of legitimate business failure, not from misconduct. If your specific situation falls into a grey area, our Policy Summary and Key Facts documents lay out the full scope and exclusions in detail. Both are available for review before you commit to a quote.
When does my cover kick in?
Cover does not begin and end with the eventual claim. The moment your business hits real financial trouble, the policy expects you to tell us. We call these moments "notifiable events," and the most common examples are:
- You intend to meet with a licensed insolvency trustee
- You have defaulted on the loan agreement with the lender
- You have reason to believe the business will enter an insolvency procedure
Telling us early is not a formality. It is how we trigger the support that helps directors avoid having to claim in the first place, which is something most directors do not realise is part of what they have paid for; it’s called our Business Support Service…
We’re invested in your success – our business support services
Our Business Support Service is available to every policyholder from day one; we’re always here to help should you need us.
Through the service, we connect directors with specialist firms in:
- Business recovery
- Cash flow management
- Credit control management
- Tax credit and deduction advice
- Debt management
- Financial restructuring
- Invoice disputes
We do not take commission or incentives from any of these introductions. They are firms we trust to genuinely help our policyholders. The service exists because it’s in everyone’s best interest that your business survives (and continues on to thrive).
Get tailored personal guarantee insurance coverage
Every policy we write reflects the specific circumstances of the director and the guarantee. The amount you insure, the number of directors on the policy, the type of loan, the sector the business operates in and the relevant credit profile all affect both the cover and the premium.
Premiums are calculated as a percentage of the personal guarantee amount and are determined by underwriting on a case-by-case basis.
It’s our job to ensure you get the perfect insurance for your specific needs. Personal guarantee insurance is the only thing we do, and that focus shapes every part of how we underwrite, price and respond to claims.
