Business loan repayment insurance is a kind of business loan protection plan, or business loan insurance. It is also sometimes called payment protection insurance.
When one or several key persons are identified as essential to the normal continuation of business operations, their passing away or becoming terminally ill may put the business at risk, and therefore, the capacity of this business to honour its financial liabilities like loan repayments. Therefore, lenders will often require businesses applying for business loans to have these key persons personally life insured, or them to subscribe a loan repayment insurance.
In case these people die or become fatally ill, business loan repayment insurance will come into play and pay a lump sum to cover part and possibly all of the outstanding instalments owed to the lender. The other major advantage of this kind of insurance is that without it, business may simply have to terminate their operations in order to meet sudden repayments - including the sudden repayment of director’s accounts.
Loan repayment insurance is now provided by many financial services providers or banks, so contrary to what many business customers may be led to believe by unscrupulous bankers, these business customers are not required to get their business loan repayment insurance from the same bank which issued the loan. In fact, businesses should also make really sure that they are not required to subscribe such an insurance at all. However, it all sounds like a wise option to subscribe to this kind of insurance, at least for small businesses.
An additional question: Respond to this Question
- What business loan can I get?
- What are asset-based loans?
- What is a secured business loan?
- What is business loan protection?
- What is an unsecured business loan?