Financial protection for a business loan
An existing FOCUS corporate client required life assurance protection for two Directors as security on a new business loan.
To assist with a current expansion project, this medical diagnostic firm had decided to seek funding via a £200,000 business loan to be repaid over a 4 year period. For the loan to be provided, security was required in the form of life assurance protection for the company’s CEO and Chairman.
I explained the concept of Key Person Protection whereby a business can insure itself against the financial loss it would suffer if a key person in their business died during the length of the policy.
A policy would be written on a “Life of Another” for both the CEO and Chairman with the company as the policyholder and premium payer, with sum assured being underwritten on the life of Key Person to be insured.
In this instance, a policy for a sum assured of £200,000 would be established by the company for each Director over a 4 year term. Should death occur within the term, the proceeds would be paid to the company for the purpose of repaying the loan.
Two new Key Person policies have been established, thus allowing the company to proceed with the business loan required to further expand.