Personal guarantee insurance now available

January 7, 2011
| By Pete Daly |
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Personal guarantee insurance designed to give some peace of mind to business development borrowers is now available in Michigan for the first time from two licensed agencies: Glenn Morris & Associates of Belmont and The Gremel Group of Rockford.

A personal guarantee, required by lenders on some commercial loans, means the borrower risks losing his or her house, savings and other personal assets if the loan is not repaid in accordance with the terms.

According to Glenn Morris, personal guarantee insurance was developed by Casper W. Zublin Jr., a co-founder of Asterisk Financial who now lives in California. Zublin is a former West Michigan resident who was a principal in the development of the Brass Works building, 648 Monroe Ave. NW, in the 1990s.

A PGI policy, subject to its specific terms and conditions, will cover a substantial portion of a guarantors’ net liability if the business borrowing the money defaults.

According to a news release from the two insurance agencies, PGI gives “small and medium-sized business owners and commercial real estate investors protection for personal assets when they sign a personal guarantee for a commercial loan. If after liquidation of the business assets, the lender seeks personal assets to repay the balance of the loan, the PGI will cover from 50 percent to 70 percent of the insured’s net liability.”

A PGI policy can provide a safety net “without eliminating the motivation to overcome difficulties and restore the health of the company,” according to the joint announcement from the agencies.

Morris said the cost of the insurance ranges from 1.25 percent of the amount guaranteed, up to 2 percent, on an annual basis. He said it was best suited for amounts under $3.5 million.

“Timing is an issue,” said Morris, explaining that applications for the coverage should be submitted only after the commercial loan has been approved.

He said last week that no policies had been sold at that point, but that there is “lots of interest.”

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