Insurance to Repay

For unsecured loans, meaning there is no collateral backing the funding, it is not unusual for a lender to make the owner(s) personally responsible for the loan repayment, should anything happen to the business. In addition, especially for larger loans, it may be requested that a life insurance policy on an owner be taken out, with the terms of the insurance to first cover the loan obligation prior to further payouts.

This may seem a bit of a cruel business practice, but it’s in place not just to safeguard investors, but to ensure your next of kin isn’t responsible for a loan they never signed up for in the event of a tragedy.  Even if a lender does not require a life insurance policy, we encourage you to do this on your own, as unexpected things happen which are difficult for those left behind, so planning ahead can help make a difficult time a little easier to manage.