What business loan insurance is
Business loan protection is life or critical illness cover that helps repay a business debt if a key person dies or becomes seriously ill. A UK law firm's guide says most business loan types can be protected, including commercial loans and mortgages, venture capital loans, director's loans and personal guarantees. The sum assured can decrease or stay fixed, the cover term has to match the loan term, and the proceeds go to the policy owner, who can repay the loan in full or keep making the original repayments.
The same guide says the premiums are generally paid by the business and, as a rule of thumb, are not a deductible business expense. It gives no premium figures and neither do we: premiums depend on the people covered and the insurer, so this calculator shows what a quoted premium adds to your loan rather than what a premium should be.
What this estimate leaves out
This is a planning estimate for fixed monthly repayments. It does not value the cover, check what the policy pays out, model premiums that change each year, premium refunds when the loan is repaid early, tax treatment or the lender's rules about insurance. An insurer's illustration and your loan agreement are the figures that count, and an adviser can say whether the policy suits your business.
To explore the loan itself, with overpayments and early settlement, use the business loan calculator.
For payment protection on a personal loan, use the loan protection insurance calculator.
Use the right country page
This page stays in pounds and uses UK terms: business loan protection, arrangement fee and APR as the effective annual rate. The country choices above the inputs open separate local pages. Choosing United States opens the business loan credit insurance calculator, which uses dollars, an origination fee and APR as the nominal annualised rate. The inputs reset and amounts are not converted.
Inputs for the business loan insurance calculator
How the premium is charged
Monthly with each repayment, added to the loan, deducted from the loan, or paid in cash at the start.
Rate type
Nominal interest rate or APR, as your loan quote states it.
Arrangement fee is
Whether the arrangement fee is deducted from the loan, added to it or paid separately.
Loan amount, interest rate and term
The loan you are pricing, before any fee or premium is taken from it, and the months you take to repay it.
Arrangement fee
A percentage of the loan amount, from your quote. Enter zero if none.
Premium
The premium from your insurance quote: the monthly amount, or the single amount, as chosen above.
CALCULATOR QUESTIONS
UK business loan insurance calculator questions
How much does business loan insurance add to a loan?
At least the premiums you pay, plus interest if the premium is added to the loan. A £45 monthly premium over 60 months adds £2,700.00 to the cost of the example loan.
Does loan insurance change the APR?
Yes, when the premium is part of the cost of the loan. In the example the APR rises from 9.23% to 10.25%, which is 1.03 percentage points.
Is it cheaper to add the premium to the loan or pay it up front?
Adding it to the loan costs more in total because you pay interest on it: £2,919.80 against £2,400.00 for a £2,400 premium. It does leave the cash you receive unchanged.
Does the calculator work out the premium?
No. Premiums depend on the people covered and the insurer, so you enter the premium from your own quote.
Who pays the premiums?
A UK law firm's guide says the premiums are generally paid by the business and, as a rule of thumb, are not deductible as a business expense. Check the tax position with an adviser.
What happens if I change country?
The United States option opens the separate business loan credit insurance calculator, in dollars, with an origination fee and a nominal APR. Your inputs are reset rather than converted.