Business solution
You signed personally. So did your family, unknowingly.
Credit line, equipment loan, lease, commercial mortgage: behind every business financing there is almost always the owner's personal guarantee. At death, the bank turns to the estate. Well-structured life insurance wipes out the debt and protects the family home.
- Debts repaid at death, guarantees released
- Often 30% to 50% cheaper than creditor insurance
- You choose the beneficiary, not the bank
Connect with a partner financial security advisor.
SME owners easily accumulate $500,000 to several million in personally guaranteed debt, often backed by the home. The creditor insurance offered by the institution covers the balance, costs a lot, belongs to the bank and disappears if you change lenders. Many families discover the extent of the guarantees on the day of death.
The solution
- 1
Inventory the guarantees
The advisor lists with you the personally guaranteed business debts and their repayment horizon.
- 2
Individual life insurance, yours
10- or 20-year term (or decreasing) on the owner, owned by the company or personally depending on tax, for an amount equal to guaranteed debts. It follows you from lender to lender.
- 3
Collateral assignment if the bank requires it
The policy can be assigned to the bank for the specific loan; the rest of the capital goes to your family or the company.
- 4
Add disability
Long-term disability also defaults on loans: disability or overhead insurance completes the setup.
A 47-year-old garage owner has a $900,000 commercial mortgage, a $250,000 credit line and a $300,000 equipment loan, all personally guaranteed. Creditor insurance from the three lenders would cost her about $5,400 a year. A $1.5M 20-year term owned by the company costs under $3,000 a year, covers everything, and the excess capital as debts decline goes back to the business.
Illustrative: premiums depend on age, health and amount. Compare with lenders' actual offers.
Who it is for
- Any owner who has signed a personal guarantee
- Entrepreneurs who own their commercial building
- Growing companies financing equipment and inventory
- Franchisees and professionals who bought a practice on credit
How much have you personally guaranteed?
A partner advisor takes inventory with you and compares the real cost of creditor insurance to an individual policy.
Bank creditor insurance vs individual life insurance
Common mistakes
- 01
Ignoring the extent of guarantees signed
Lease, credit line, corporate cards: the list is longer than you think. Take inventory.
- 02
Stacking creditor insurance policies
Three lenders, three policies, three premiums: one individual policy does better.
- 03
Planning nothing for disability
Loans don't stop when income stops.
Points to consider
- The amount must be reviewed when debt rises (expansion, acquisition).
- Corporate ownership with assignment to the bank has specific tax rules on premium deductibility.
- Creditor insurance may still be useful for a small one-off loan; compare case by case.
- Personal guarantee terms are also negotiable: a lawyer can reduce exposure.
The solutions presented are for information only and rely on current Canadian and Quebec tax legislation, which may change. Sommet Protection gives no financial, tax or legal advice: the analysis is done by a partner financial security advisor, together with your accountant and legal advisors.
Frequently asked questions
Why not take the insurance offered by the bank?
It is generally not underwritten (so more expensive for a healthy person), belongs to the bank, does not follow a loan refinanced elsewhere and covers only the balance. An individual policy is cheaper, portable and for your benefit.
Can the company deduct the premium?
Partly, when the policy is assigned as collateral for a business loan: the deductible portion depends on tax rules. Your accountant confirms.
Protecting the business you built: the insurance guide for owners and the self-employed
The five risks that close profitable SMEs, and how to fund them for a fraction of their cost.
Read the guide- 8 chapters
- 1. You are the most important asset — and the least insured
- 2. A partner's death: the scenario that divides families
- 3. Disability: three protections, three different roles
- 4. The key person worth 30% of revenue
- 5. Debts, guarantees and lenders
- 6. Tax at death on shares: the founders' file
- 7. A health plan for your incorporated company
- 8. Where to start
The solutions
Key person insurance
Protect the business from losing the person it depends on.
Learn more →Shareholders' agreement
Fund the buyout of a deceased or disabled partner's shares.
Learn more →Self-employed disability
Replace your income when you can no longer work.
Learn more →Business overhead expense
Pay rent, salaries and loans during your disability.
Learn more →Business critical illness
A lump sum for the company or owner at diagnosis.
Learn more →Tax at death on your shares
Fund the tax on your company's value so the successors don't have to sell.
Learn more →Business succession and transfer
Secure the transfer to family or executives, whatever happens to the founder.
Learn more →Health and key employee retention
Protect and retain your essential executives with company-funded benefits.
Learn more →
Let's talk about your business
A partner SME specialist advisor calls you back for a no-fee diagnosis. Bring your shareholders' agreement and financial statements: the advisor quantifies with you.