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Personal Guarantee Insurance (PGI) What is it?

12th July, 2019
Robert Moore

Written ByRobert Moore

Marketing Manager


Rob has over a decade of experience in web and general marketing. He has extensive knowledge of the Insolvency sector and has helped many worried directors with their questions.

Rob is now working with the Board at KSA Group Ltd to develop strategic marketing programmes to support the business plan and drive more company rescues.

Robert Moore
  • Why do I need this?
  • How does Personal Guarantee Insurance work?
  • How much does it cost?
  • Are there any exclusions?
  • So, should I take out Personal Guarantee Insurance?

Personal Guarantee Insurance helps out those who have signed a personal guarantee (usually company directors) on a new or existing loan, by providing them with cover. It protects the guarantor in the case of the loan being called in. Typically, the loan is guaranteed by the individuals’ personal assets i.e. a house.

Why do I need this?

When you need to apply for finance, the bank or finance provider is likely to request you to sign a personal guarantee if the assets of the company cannot cover the loan. Personal Guarantee insurance provides protection for your personal assets, hence if the worst happens, and the company became insolvent, you can be reassured that your own personal and family assets are safe and not at threat.

What are they key features?

  • An Annual Insurance Policy, regulated by the FCA
  • The level of risk and individual circumstances determine the price
  • Insurance is available to directors of limited companies or partners of an LLP – you can insure multiple guarantors on a single policy
  • It is available for personal guarantees against secured and unsecured loans
  • Cover is based on a fixed percentage of the guarantee amount – usually a low percentage and never to cover the full amount. The maximum is 80%. Over time, the cover rises as the business become more stable and show they are less risky to the lender.

How does Personal Guarantee Insurance work?

It is very straightforward and simple – apply via an online form (the level of cover available depends on if the personal guarantee is for a secured or unsecured loan). Once you have applied, insurers assess your circumstances and will provide you with a policy to review.

To apply, you must be a member of a UK partnership or a Limited Company Director.

How much does it cost?

The cost of PGI depends on how large the guarantee is, what assets are being used as security, the timeframes involved and the overall risk of the insurer.

Typically, it varies from £750 p.a. to £12,000.

The costs of insurance can be categorised as a company expense when the finance the personal guarantee is needed for, is for the company. This means there is less impact on personal finances for taking out the insurance.

Are there any exclusions?

Exclusions tend to be included in the detailed policy summary you receive. However, some typical exclusions to your insurance are:

  • If the personal guarantee is covered by another insurance
  • If a personal guarantee is called in due to dishonest, fraudulent behaviour
  • When, following a notification, the insurance support advice is ignored
  • If you are aware of a potential insolvency event, before or at the time of taking out the cover

So, should I take out Personal Guarantee Insurance?

Being licensed insolvency practitioners, we hear from directors facing financial struggles, daily. When you have a Limited Company structure, you are prevented from your own personal possessions being taken. When you take out PGI, this changes. The corporate veil is lifted, meaning there is no separate legal entity for the director and the company, instead they are seen as one. From this, directors see their company liquidation lead to personal bankruptcy.

Taking out personal guarantee insurance prevents this. It protects your personal possessions if ever a situation like this occurs.  However, it is not cheap and it might be a drain on yours or the company’s cashflow.  At least the choice is there.

Worried Director What Will Happen To Me After Liquidation?

in Company Liquidation What is …?

"A man in the pub said I cannot be a director of any other company if I liquidate my company. Is this true?"Actually, this statement is entirely false! Misconceptions like this frequently arise from individuals with limited understanding of the subject matter. Such misinformation can cause undue anxiety for directors considering liquidation, fearing it might personally affect them. Guess what? Listening to bar room experts, inexperienced accountants, or no insolvency specialist lawyers can stop decisions being made, this failure to make a decision is really what could land you in trouble. So how will liquidation affect me and how long does it take? Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time. What is more, if as a director, you have been compliant and on the payroll for many years, you can actually claim redundancy from the government like any other employee. But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse such as losing your house. So, act now and get help for your company and more importantly start reducing your own risks.Voluntary liquidation is the quickest most efficient way to deal with an insolvent company that has no future. As a director of an insolvent company, you are at risk if you do not act. This risk RISES the longer you don't act to put the company into liquidation.If you fail to act and the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years. This is known as a conduct report on each director.  If the OR can prove there was wrongful trading where, for instance, you have taken credit from a supplier or took deposits from customers when you knew that it was highly unlikely that you could pay them back, then you could be made personally liable.This is known as the "lifting of the veil of incorporation" that protects directors under limited liability. If this happens then you could made liable for PAYE, VAT and creditors monies from the time that you should have known the company had no reasonable prospect of surviving the problems it faced.Additionally, the directors may face disqualification proceedings under the Company Directors Disqualification Act 1986 for up to 15 years, they can be fined and may face the loss of personal assets like your home, or even personal bankruptcy.Look, if you as directors have acted naively you may not know that you have broken these laws, but now you do know, it is vital to ensure that you protect yourself as a director by acting quickly to cease trading and put the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are solved. What is Creditors Voluntary Liquidation and what does it mean for me? In short, liquidation usually means, the company's trading stops and it's assets are turned into cash or "liquidated".All other possible liabilities, like employment liabilities, landlord's rent or payments to lease companies are stopped. It really is the end of the company, but the "business" may survive if a phoenix is organised. Liquidation is a powerful way to END creditor pressure and let you get on with your life. What if I have signed personal guarantees? If you have signed personal guarantees or indemnities to lenders, then the liquidation could lead to them being called in if the bank cannot get its money back from the company. There is little that can be done about that, but you should not delay decisions on liquidation to try and prevent a PG being called in: just think what ALL of the company's debts landing on your shoulders would do. Also it should be noted that HMRC now rank ahead of floating charge holders in any liquidation since December 2020.  Consequently, this may well mean that lenders that you have personally guaranteed will get less recovery hence exposing you more.All banks will agree a deal to repay the PG over time - provided you work with the bank to reduce their exposure.One great piece of FREE advice - always make sure that ALL tax returns, VAT returns and annual returns have been completed and sent in and that other "compliance" issues are dealt with wherever possible. These are important processes and will help protect you as individual directors. It shows that you have been acting properly.  I have heard about directors being able to claim redundancy in liquidation If you have been employed by the company and made payments via PAYE then you will be able to claim redundancy from the government and this is in fact a very simple process (20 minutes to fill out a form and we can help with that) so there is no need really to employ a third party to make a claim.  This process has been open to fraud so the HMRC are cracking down on operators that claim to be able to get money back when there is not enough "paperwork".  It isn't worth the risk.  If it sounds too good to be true then it probably is!You need to learn more about the options. This is clearly a general guide so, if you have any worries at all, please, just call us and we will talk you through the situation free and with expert guidance for your situation. Call one of our advisors or if you prefer, call our IPs (insolvency practitioners) now:Just one CALL will help relieve the stress and get you out of the mess.Why not call 08009700539 or 020 7887 2667 now?We could help you start the liquidation process today.(8.15am till 5.00pm; Out of hours call on 07833 240747, Wayne Harrison (IP)  or Eric Walls (IP) on 07787 278527)Finally, please remember this: NO BUSINESS is worth losing your health, relationships, marriages or your children over. Act properly, take advice, get the problem sorted and then get on with your life. In a little while the stress will go and you can focus on other things that are more important.Want more information on liquidation? Get our new free 2023 Experts Complete Guide to Creditors Voluntary Liquidation that covers Bounce Back LoansWe are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue and company rescue, we can help solve your problems but only if you talk to us. Call 0800 9700539 for help.or email us your worries at 

Worried Director What Will Happen To Me After Liquidation?

Notice of Intention To Appoint Administrators

A notice of intention to appoint administrators is when the company files a document to the court to outline that it intends to go into administration if a solution cannot be found to its immediate financial problems. It can be used as part of the pre-pack administration process as well as used to restructure a failing business to avoid its liquidation.

Notice of Intention To Appoint Administrators
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What Is A Winding Up Petition By HMRC or Other Creditor

A winding up petition is a legal notice put forward to the court by a creditor. The creditor petitions to the court if they are owed more than £750 and it has not been paid for more than 21 days. The application, in effect, asks the court to liquidate the company as they believe the company is insolvent.

What Is A Winding Up Petition By HMRC or Other Creditor

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