Personal guarantee insurance covers the financial exposure you take on when you sign a personal guarantee for your company’s debts. If the company fails and the guarantee is called in, the insurance pays out instead of you. It is the only product that directly protects your personal assets from guarantee claims.
We advise directors on personal guarantees every week, and the most common regret is not having insured the guarantee before the company got into trouble.
PGI is not cheap. Premiums typically run 3 to 5% of the guaranteed amount per year. But for directors who have guaranteed six-figure facilities secured against their home, the premium is a fraction of the potential loss. We explain below how PGI works, what it covers, what it does not, and whether it is worth the cost for your situation.
Quick Answer: How Personal Guarantee Insurance Works
You take out a PGI policy that covers a specific personal guarantee (or multiple guarantees). You pay an annual premium. If the company enters insolvency and the creditor calls in the guarantee, you submit a claim to the insurer.
If the claim is valid, the insurer pays the guaranteed amount (or a proportion of it, depending on the policy) directly to the creditor or reimburses you. Your personal assets are protected up to the policy limit.
We stress “if the claim is valid” because PGI policies have exclusions. The most important: the policy typically does not cover guarantees where the company was already insolvent at the time the policy was taken out, guarantees called in due to fraud or deliberate default, or claims made outside the policy period. We cover the exclusions in detail below.
What Personal Guarantee Insurance Covers
Bank loan guarantees. The most common use case. You guaranteed a business loan and the company enters liquidation.
Commercial lease guarantees. You guaranteed the rent on a commercial property and the company cannot pay.
Trade credit guarantees. You guaranteed a supplier credit facility.
CBILS and similar facility guarantees. Where the loan terms included a personal guarantee (CBILS loans above £250,000 could include guarantees).
Coverage is typically 70 to 80% of the guaranteed amount, not 100%. This co-insurance element means you bear some risk yourself, which keeps premiums manageable and prevents moral hazard. We see policies that cover 80% of the first £500,000 of guarantee exposure as the most common structure.
What Personal Guarantee Insurance Does NOT Cover
Pre-existing insolvency. If the company was already insolvent when you took out the policy, the insurer will reject the claim. You must take out PGI while the company is solvent.
Fraud or deliberate default. If the company’s failure resulted from fraudulent trading, deliberate asset stripping, or your own misconduct, the policy will not pay.
Guarantees given after the policy inception. New guarantees signed after the policy starts are not automatically covered. You need to notify the insurer and add them.
Claims made after the policy lapses. PGI is a claims-made policy. If the guarantee is called in after the policy has lapsed (because you stopped paying premiums), you are not covered.
Wrongful trading orders and misfeasance claims. PGI covers personal guarantee calls. It does not cover other personal liabilities arising from insolvency. For those, you need directors’ and officers’ (D&O) insurance.
Personal Guarantee Insurance Costs: Is It Worth the Premium?
Premiums vary by risk profile but typically range from 3 to 5% of the guaranteed amount per year. For a £100,000 guarantee, expect to pay £3,000 to £5,000 annually.
We advise directors to run the maths: if you have guaranteed £200,000 and the guarantee is secured against your home, a £10,000 annual premium protects a £200,000 exposure.
If the company fails after 5 years of premiums, you have paid £50,000 in premiums to avoid a £200,000 guarantee call. If the company trades successfully for 10 years and you never claim, you have paid £100,000 in premiums for peace of mind.
We find PGI makes most sense for: directors with large guarantees (£100,000 plus) secured against their home, directors in high-risk industries (construction, hospitality, retail), and directors approaching retirement who have more to lose personally.
It makes less sense for: small unsecured guarantees under £25,000, directors of very stable businesses with low insolvency risk, or companies where the guarantee can be renegotiated or removed.
PGI vs D&O Insurance: What Is the Difference?
PGI and D&O insurance are different products that cover different risks:
PGI covers personal guarantee calls. The creditor demands payment under the guarantee you signed.
D&O insurance covers claims against you for breach of director duties: wrongful trading, misfeasance, negligence, regulatory investigations.
We advise directors with significant personal exposure to consider both. PGI handles the guarantee risk. D&O handles the conduct risk. Together, they cover the two main routes to personal liability in insolvency.
How to Get Personal Guarantee Insurance
Audit your guarantee position. Know what you have guaranteed, the amounts, and whether they are secured against your property.
Approach a specialist broker. PGI is a niche product. General insurance brokers may not have access to it. Specialist business insurance brokers who work with SME directors are the right starting point.
Apply while the company is solvent. PGI underwriters assess the company’s financial health. If the company is already struggling, the premium will be higher and coverage may be declined.
Review the exclusions carefully. Understand what is not covered before you rely on the policy.
Keep the policy active. If you stop paying premiums and the policy lapses, you lose coverage. Claims made after lapse are not covered.
Company Debt connects directors with licensed insolvency practitioners who can assess your personal guarantee exposure. A confidential consultation will clarify what you need to protect and whether PGI is the right tool for your situation.
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Typically 3 to 5% of the guaranteed amount per year. A £100,000 guarantee costs approximately £3,000 to £5,000 annually to insure. Premiums vary by the company’s financial health, industry, and the nature of the guarantee.
Can I get PGI if my company is already in financial difficulty?
Unlikely. PGI underwriters assess the company’s financial health. If the company is already struggling or insolvent, the premium will be prohibitive or coverage will be declined. PGI is a product you take out when the company is healthy, not when it is already in trouble.
Does PGI cover 100% of the guarantee?
Most policies cover 70 to 80% of the guaranteed amount, not 100%. The co-insurance element means you retain some personal risk. Check the policy terms for the exact coverage percentage and any caps or sub-limits.
Can I take out PGI for a guarantee my spouse signed?
Generally no. PGI is taken out by the guarantor in their own name. If your spouse co-signed the guarantee as a director or shareholder, they would need to be on the policy too. If only your spouse signed and you did not, you are not the insured party and cannot claim.
