How to protect a commercial mortgage if key individuals die

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When taking out commercial mortgages a key individual such as the business owner or a director has a level of responsibility for repaying outstanding debt. If they die or become seriously ill, there could be difficulties in running the business profitably and repaying the commercial mortgage. It can be especially difficult if the person responsible for the debts is a sole trader or a business owner with only a few employees.

Fortunately, there is a way to protect risks. Business loan insurance is similar to personal life insurance, it ensures that the company can pay its debts if a key individual dies or suffers a serious illness.

A lump sum is paid out on death or serious illness. This can be used for repaying any loans that the business is liable for, minor illnesses or injuries when the individual is expected to recover are not covered. For less serious conditions there is Income Protection of Executive Income Protection insurance, which provides regular payments that can be used towards keeping up with the commercial mortgage payments.

Protecting commercial mortgage repayments is not a legal requirement, but if the mortgage is for business premises and the business cannot keep up with repayments, the property could be repossessed.

Business loan insurance policies can cover one or more key individuals and claims are either paid out to the business or to the commercial mortgage lender. The policy costs depends on age, lifestyle and the health of the individual insured.

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