Debt Cancellation - Guarantor Protection 

What is it?

Businesses use debt to fund expansion or purchase assets.  Banks supply the funds to business but they want security and they want as much of it as they can get. 

Often business owners will have loans secured against not only business assets but personal assets such as the family home.  In other situations guarantees have been given by the business owners or third parties to secure the finance.

If a partner dies or is disabled unexpectedly the business suddenly has multiple problems:  

• Loss of revenue or contracts & cost of finding a replacement (covered in Key Person Cover). 
• Finding the cash to pay out the disabled partner or their family/estate for their share of the business (covered in Buy / Sell - Partnership Protection).  
• Finding the cash to finalise loans in order to release real property or extinguish guarantees

How can insurance help?

When analysing each situation it is important to look at each aspect of the businesses needs.  A close inspection of any loans or guarantees is a basic part of this analysis. 

Once quantified this need can also be addressed with insurance in the same way as one would for key person or buy sell needs. 

Lawyers

Lawyers are great people because they know what should go in these agreements so that when things go wrong due to death or disablement of a business partner you have well laid plans aimed at protecting the business itself.  A properly drafted agreement outlines how the funds are to be used in the event of a claim.   Agreements drawn up by experts in this field are often an inexpensive way to ensure that all of the objectives of the business owners are met.

If you don't know any experts in this field please let us know as we do. 

This information (including taxation) is general in nature and does not consider your individual circumstances or needs.  Always seek professional advice before making a decision and consider a Product Disclosure Statement. Information is for Australian residents only.  Anita Muecke trading as AVA Insurance Consulting Group is an Authorised Representative of Lifespan Financial Services AFSL 229892. To view contact details & Financial Services Guide please click here and Lifespan Privacy Policy please click here.