Company Ltd are a small-medium sized business who sell clothes and have 1 shareholder. The company arrange a loan of £100,000 and as there is only 1 shareholder, the lender asks for a personal guarantee, should the debt not be repaid. The shareholder gives his family home as the personal guarantee.
Upon discussion with their adviser, the director concludes that if he were to pass away, the business would have to repay the debt because there would be no way the business could carry on running, therefore leaving his family at risk of having to sell their house. To prevent this situation from possibly occurring the company take out a business loan protection policy with the sum assured matching the amount of money borrowed.
Have you made a loan to the business? Did you know these must be repaid to your estate if you pass away?
It is advisable to include any of these Directors Loan Accounts in the sum assured so that the business can repay these debts immediately.