Personal Guarantee Insurance for Landlords
Commercial landlords are subject to Personal Guarantees when acquiring a commercial investment mortgage. Although the lender has security of the property or freehold itself, often this isn’t enough to sign off on the mortgage.
If the property fails as an investment the Lender will sell the asset at auction value, this will often leave a difference that is reclaimed through a Personal Guarantee. Other costs which can incur on the Personal Guarantee include but are not limited to the rolled-up interest of the loan and any legal fees associated with the repossession and sale of the property.
Landlords can access a Personal Guarantee Insurance which will be tailored and prescribed in accordance to the property itself.
Key features of Landlords Personal Guarantee Insurance
1. Maximum Day One Coverage
As there is a secure charge over the property, insurers provide 80% cover on Personal Guarantees from day one.
2. Quick Quotation Process
Because the risk is based on the profitability of the asset itself there are fewer details to consider for an insurer to release a quote. Quite often quotations are instant, allowing for a transactional process.
3. Lower Premiums
As the insurance is based on the viability of the investment property, premiums are often akin to the Loan to Value (LTV) of the Mortgage itself, this usually comes at a discounted premium to a standard Personal Guarantee Insurance policy.
4. Ultimate Backstop
Unlike Rent Guarantee Insurance, Personal Guarantee insurance is the ultimate backstop to protect your personal estate. Where other insurances may provide a payout in the event of property damage or tenant absence, this may not pay out in time to cover the outstanding mortgage repayment.
5. Support Benefits
Insurance providers have an interest in your investment when you buy a policy; For this reason, they offer support services to mitigate the likelihood of property repossession or company insolvency. Providers will also appoint and contribute towards a professional debt negotiator if the Personal Guarantee is actioned, which works to reduce the demand and relieve stress to directors.