Discover the most frequently asked Business banking questions
What is business loan protection?
Business loan protection is a kind of insurance which helps a borrower in case a very unfortunate event happens during the time when he or she is still liable to pay back the lender for a subscribed loan. As a matter of fact, business loan protection is sometimes just simply called business loan insurance.
Business loan protection comes into play when a key employee, partner or owner becomes critically ill or passes way, or when an owner becomes disabled as a result of illness or injury. This kind of insurance allows normal business activities to continue, and to find a solution with the lender, as the business loan protection plan almost immediately releases funds to help repay at least part of the loan. These lump sums will help cover the business loans and other credit facilities. In fact, covers can even be increased to stay in line with increasing loans.
Business loan protection can usually be subscribed from the banks which issued the loan, but can also be subscribed from other banks, or from specialised insurers. This is an especially useful solution in case director loan accounts should be paid off in case of death, which is almost always the case.
In case businesses relying on the performance of one or few key persons apply for a business loan, banks will usually insist that these key persons subscribe a life insurance plan or business loan protection plan in their name, so that if they suddenly die, the insurance pays off the loan. This is very often the case with small businesses.
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