Q:
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Don't I already have this coverage? |
A:
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While PGI may sound familiar, this is a new and unique product and has not been offered until recently. The only other 'coverage' available has been the protection provided by the business assets or your personal net worth. |
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Q:
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I haven't heard of PGI before and I've been doing business without it for a long time. Why do I need it now? |
A:
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It may be true that you've been going along fine without this insurance, so it's possible to think you don't need it. However, you may have also owned a home for 20+ years, but you wouldn't think of owning a home without homeowner's insurance. Same for your car. You may have been dirivng for 20+ years and have never been in an accident. That doesn't mean that you should drive without auto insurance. This policy is meant to cover you should something unforseeable go wrong - a new strong competitor, your supplier goes out of business, there's a technology change in your business, etc. Under these conditions, your business could fail and the safety net provided by the policy would offer substantial protection for your personal net worth at a time when your business is no longer providing income. |
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Q:
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Why doesn't the policy cover 100% of the risk? |
A:
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Because Personal Guarantee Insurance (PGI) is not meant to entirely eliminate your risk, but to share it. If the insurance were to cover 100% of the loss, then a borrower would have little incentive to resolve or address any operating issues in times of trouble. Instead, by covering between 30% and 70% of the net liability (depending on the coverage purchased), the policy provides you with a safety net without eliminating the motivation to overcome difficulties and restore the health of the company. |
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Q:
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Who is the carrier for the insurance? How do I know they'll pay? |
A:
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The carrier for the insurance is AmTrust Financial, a billion dollar specialty insurance company focused on the needs of small and medium size businesses. They're listed on the NASDAQ as AFSI. They're an A.M. Best A (Excellent) rated company with substantial surplus and a strong track record of paying claims.. |
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Q:
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I just took out a loan for my business. Why should I spend more money? |
A:
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For significantly less than the interest on your loan, you can get the security of having a policy that covers your personal guarantee risk. It provides you with peace of mind and helps to protect what you've worked for. |
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Q:
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This is only an annual policy. Can the carrier cancel the policy at any time? |
A:
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If your business starts to take a turn for the worse and you are in default on your loan, the carrier will renew your policy provided you continue to pay your insurance premiums. It's a feature of the policy. |
