Personal Guarantee Insurance at a Glance
- What it covers: A percentage of your personal liability if your business becomes insolvent and the lender calls in your personal guarantee
- Coverage level: up to 80% from the start for secured loans; for unsecured loans 60% in year one, 70% in year two and up to 80% from year three
- Cost: Typically 1.6% to 5.2% of the guaranteed amount per year
- Maximum cover: £750,000 for secured loans; £500,000 for unsecured loans
- Claim trigger: Formal insolvency of the business
- Who pays the premium: the business or the director; the tax treatment is not something we could establish
- Policy term: Annual, renewable each year
What Is Personal Guarantee Insurance?
When a lender asks you to sign a personal guarantee on a business loan, they are asking you to put your personal assets behind the debt. If the business cannot repay, the lender can pursue your home, your savings, or other property you own.
Personal Guarantee Insurance (PGI) is designed to reduce that exposure. If the business enters formal insolvency and the lender calls in the guarantee, the insurer pays a percentage of the amount outstanding, which comes off what you owe. What it does not do is remove the guarantee. You have still signed it, and the insurer is covering part of it rather than standing in your place.
How Personal Guarantee Insurance Works
What the Policy Covers
PGI covers a percentage of what is outstanding on your guarantee when you claim. Two things have to happen before it pays: the business has to enter formal insolvency, and the lender has to enforce the guarantee against you.
The payout reduces what you are left owing. Guarantee £100,000 on a policy covering 75% and the insurer pays £75,000 towards it, leaving £25,000 that is still yours to find.
Some policies also include access to business support services during the loan term, such as cashflow management and business recovery advice, which can help avoid reaching the point of insolvency at all.
How Much of the Personal Guarantee Can Be Covered
On secured loans, cover is up to 80% from the start. On unsecured loans, coverage starts at 60% in year one of the policy and rises to 70% in year two. From year three onwards, unsecured cover reaches up to 80%, the same ceiling as secured loans.
The maximum cover amounts are £750,000 for secured loans and £500,000 for unsecured loans. If your personal guarantee exceeds these limits, the remaining exposure above the cap is uninsured.
When Cover Applies
Cover applies only when the business enters formal insolvency: liquidation, administration, or a recognised equivalent. A business that is struggling financially, behind on payments, or in negotiations with creditors does not trigger a claim. Do not assume the policy pays out before that point.
You must tell the insurer in writing as soon as you become aware of a notifiable event. Purbeck’s policy summary lists events such as the business defaulting on a loan, a lender demanding repayment, a notice of intention to appoint an administrator, or a plan to meet a licensed insolvency practitioner. If you do not notify in time, the policy says no claim will be paid.
What Personal Guarantee Insurance Does Not Cover
Common Exclusions
PGI policies exclude claims caused by fraud or dishonesty on the director’s part. Purbeck’s policy summary excludes a lender’s demand caused by any “deliberate, dishonest, fraudulent or reckless act or omission” by you, and a claim can also be cut if you took money from the company you were not entitled to.
Pre-existing financial difficulties at the time the policy was taken out are usually excluded. An insurer will not cover a guarantee on a loan where the business was already in serious financial trouble when the policy started.
The insurer pays no more than the sum insured shown in the policy schedule, so the schedule needs to name the loan and the guarantee you want insured.
Policy Limits
PGI never covers 100% of the guarantee. The uncovered portion stays with you personally: at least 20%, and 40% on an unsecured loan in its first year, regardless of what the insurer pays on the rest. That is not a footnote: it is the core limitation of the product.
Maximum cover is £750,000 for secured loans and £500,000 for unsecured loans. For guarantees above these thresholds, the excess above the cap is entirely the director’s risk.
When a Claim May Be Refused
A claim can be refused if the director did not notify the insurer of a notifiable event as soon as possible. Purbeck’s notifiable events include a loan default, a lender’s demand for repayment, a notice of intention to appoint an administrator, and a planned meeting with a licensed insolvency practitioner.
A claim can also be refused or reduced if, before the policy started, you knew or should reasonably have known the business was likely to become insolvent or that the lender was likely to call the guarantee. A claim caused by a deliberate, dishonest or reckless act on your part is excluded too.
Who Should Consider Personal Guarantee Insurance?
Directors Signing a Personal Guarantee
If you have signed a guarantee, or the lender has put one in front of you, PGI is in scope. It turns up on secured and unsecured business loans, commercial mortgages, asset finance and invoice finance, wherever the guarantee is a condition of the money.
If your business has multiple directors who have each signed a personal guarantee, each guarantor can take out their own PGI policy. Coverage does not need to be consolidated.
When the Personal Risk Is High
PGI makes most sense in three situations: the guaranteed amount is large relative to your personal net worth; the loan is secured against personal assets such as your home; or your business operates in a sector with a meaningful insolvency risk.
Buy it if losing the guaranteed amount would do real damage to you personally: if the call would cost you your house or most of your savings, paying 1.6% to 5.2% a year to take 60% to 80% of that off the table is a cost worth carrying.
When Insurance May Not Be Worth It
Do not buy it if you could absorb the guarantee from your own resources without it hurting. On a £20,000 guarantee, a business with sound accounts and a director with substantial personal assets is paying 1.6% to 5.2% a year to insure a loss it could already take.
The case also weakens as the loan matures, because the premium is charged on the guarantee while the balance behind it falls. Once the amount left is one you could absorb yourself without serious consequence, you are paying for cover you no longer need. Price it again at each renewal rather than letting it roll over.
How Much Does Personal Guarantee Insurance Cost?
Typical Premium Costs
Premiums run from 1.6% to 5.2% of the guaranteed amount a year. The rate is charged on the guarantee itself, so a £500,000 loan with a £150,000 guarantee is priced on the £150,000. At 2.5% that is £3,750, and you pay it again every year you renew.
What Affects the Price
Where you land in the 1.6% to 5.2% range depends as much on your own position as on the business:
- Amount of the guarantee: Larger guarantees attract more scrutiny and can carry higher rates
- Loan type: Purbeck names secured or unsecured lending as one of the factors that sets the rate, alongside the business’s sector, its credit score and the lender’s requirements
- Business financial health: A business with strong accounts and a clean trading history will attract lower premiums than one with recent difficulties
- Creditworthiness of the guarantor: The director’s personal financial position is assessed alongside the business
- Loan term: Longer-term commitments may carry a different pricing structure
Who Pays for the Policy
The policy protects you, because the guarantee is your own liability, and the premium Purbeck quotes includes Insurance Premium Tax. We found no HMRC guidance covering a company paying this premium for a director, so whether the cost is an allowable deduction for the company, and whether it counts as a benefit in kind for you, is the one thing here your accountant has to settle on your own figures.
Pros and Cons of Personal Guarantee Insurance
Advantages
- Reduces the personal financial impact if the business becomes insolvent and the guarantee is called in
- Reduces, but never removes, the exposure of personal assets such as the family home: the uncovered portion remains the lender’s to pursue
- The business can pay the premium rather than the director, though the tax treatment of that payment is not something we could establish
- Multiple guarantees from different lenders can often be covered under one policy
- Some policies include business support services to help prevent insolvency
- Annual renewal means you can reassess coverage as the loan balance reduces
Disadvantages
- Does not cover 100% of the guarantee: the director remains personally liable for the uncovered portion
- Only pays out at formal insolvency, not at earlier stages of financial difficulty
- Premium adds to the annual cost of the borrowing
- Exclusions for fraud, pre-existing difficulties, and late notification can reduce the practical value of the policy
- Maximum cover limits (£750,000 secured / £500,000 unsecured) may not match the full guarantee on large loans
- Annual renewal required: if you miss a renewal, cover lapses and cannot be backdated
How to Apply for Personal Guarantee Insurance
What Information Insurers Need
To assess a PGI application and provide a quote, insurers typically require:
- The amount of the personal guarantee and the loan it relates to
- The type of finance (secured, unsecured, commercial mortgage, etc.)
- Financial accounts for the business (usually two to three years of accounts)
- Basic information about the director providing the guarantee
- The loan term and repayment structure
When to Apply
Apply before you sign the guarantee, or at the same time. You can still apply afterwards, but the insurer assesses the business as it stands when the policy starts, so anything that has gone wrong in between may be excluded. Apply early and the cover runs from the first day of the loan instead of starting part way through it.
What Happens After You Apply
Once the insurer receives your application, they will provide a quote based on the information submitted. If you accept the quote and pay the premium, the insurer issues a certificate of insurance confirming your coverage. Keep this certificate alongside your loan documentation.
Purbeck Insurance Services, our editorial partner on this page, distributes PGI underwritten by Markel International (an A-rated, FCA-authorised insurer) and handles the quote and application process online.
Alternatives to Personal Guarantee Insurance
Negotiating the Guarantee
Not every lender insists on an unlimited guarantee, so ask before you sign. Three things are worth asking for: a cap at a stated amount, an end date, and wording that ties the guarantee to this one facility rather than to everything you ever borrow from them. A lender with a well-secured loan, dealing with a borrower who has a record behind them, gives you a stronger hand to ask.
Reducing the Guaranteed Amount
If the lender requires a personal guarantee, you may be able to reduce the guaranteed amount by offering additional security.
Providing a debenture over the business’s assets, a charge over specific property, or additional collateral can reduce the lender’s perceived risk and their need for a full personal guarantee.
Looking for Finance Without a Personal Guarantee
Some finance structures do not require a personal guarantee. Invoice finance and asset-based lending are typically secured against specific business assets rather than the director personally. Revenue-based finance and some fintech lending products do not require guarantees in all cases.
The UK Government’s Growth Guarantee Scheme, which followed the Recovery Loan Scheme, gives the lender a government-backed guarantee, so the lender may ask less of you personally. A personal guarantee is still possible under the scheme rather than ruled out, and whether one applies to your facility is a question for the accredited lender.
Our Growth Guarantee Scheme guide sets out the eligibility criteria and the accredited-lender list.
Personal Guarantee Insurance FAQs
How long does personal guarantee insurance last?
PGI is an annual policy that must be renewed each year. Coverage lapses if you do not renew. There is no automatic continuation.
Can you cover multiple personal guarantees on one policy?
Yes. If you have signed more than one personal guarantee across different loan facilities, some insurers, including Purbeck, can include multiple guarantees within a single policy.
What does personal guarantee insurance actually pay out?
It pays a percentage of the amount outstanding on your personal guarantee at the time of a validated claim, subject to the coverage level (60 to 80%) and the maximum cover limits.
The payment is made to reduce your liability to the lender, not paid directly to you as cash.
How much does personal guarantee insurance cost in practice?
Premiums range from 1.6% to 5.2% of the guaranteed amount per year. A £100,000 guarantee at 2% costs £2,000 per year. The actual rate depends on the loan type, business financial health, and the director’s personal creditworthiness.
What is the maximum coverage amount?
The maximum is £750,000 for secured loans and £500,000 for unsecured loans. If your personal guarantee exceeds these limits, the amount above the cap is not covered by the policy.
When should I make a claim?
As soon as you become aware of a notifiable event, such as a loan default, a lender’s demand for repayment, a notice of intention to appoint an administrator, or a plan to meet a licensed insolvency practitioner.
Purbeck’s policy summary says no claim will be paid if you do not notify the Support Desk in writing as soon as possible.
Methodology: We read Purbeck Insurance Services’ own product pages and policy summary (purbeckinsurance.co.uk) in October 2026 and took every cover level, premium range and maximum from them. Purbeck is our editorial partner on this page. The figures on this page are Purbeck’s published terms, not a survey of the market, and another insurer may price or cap cover differently.
Purbeck Insurance Services is a trading name of Purbeck UK Limited, distributing PGI underwritten by Markel International (A-rated, FCA authorised and regulated). Verification date: 16 October 2026.