Personal Guarantees and Business Debt: Could Your Family Home Be at Risk?
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Could your family home be at risk if you die with business debts? Yes, if you have signed a personal guarantee or secured borrowing against personal assets. A limited company protects you from most business debts, but a personal guarantee can make your estate liable for the loan, and that could include your home.
It is a bigger issue than many owners realise. New research by Scottish Widows, carried out by YouGov with 2,019 business owners in 2026, found that almost a third of UK businesses hold commercial debt, and 19% of those are not sure how it would be repaid if an owner died.
Key facts
- 32% of UK businesses hold some form of commercial debt (Scottish Widows / YouGov, 2026).
- 29% of UK businesses with debt owe between £100,000 and just under £1 million.
- 15% of UK business owners with debt expect a personal guarantee to be called on if they die.
- 19% of UK business owners with debt are not sure how it would be repaid on their death.
- Business loan protection insurance pays a lump sum to the business to repay a loan if a named owner dies or is seriously ill.
How common is business debt among UK businesses?
Very common. Almost a third of UK businesses carry some form of commercial debt, and among those, 29% owe between £100,000 and just under £1 million. Business loans are the most common type, followed by overdrafts and business credit cards.
| Type of business debt | Share of all businesses surveyed |
|---|---|
| Business loan (secured or unsecured) | 13% |
| Business overdraft | 10% |
| Business credit card balance | 9% |
| Asset finance (hire purchase, leasing) | 8% |
| Informal loans from owners | 7% |
| Commercial mortgage | 6% |
Source: Scottish Widows Business Protection Research, conducted by YouGov, March 2026 (2,019 GB business owners and senior decision makers). Some businesses hold more than one type of debt.
How do owners expect debt to be repaid if they die?
Most owners expect business assets to cover it, but a significant minority are relying on personal guarantees or personal assets. Nearly one in five have no clear plan at all, and one in 10 think the debt simply would not be repaid.
| How owners with debt expect it to be repaid on their death | Share of owners with debt |
|---|---|
| Charge against business assets | 43% |
| Not sure | 19% |
| Personal guarantee | 15% |
| Personal security on business debt | 14% |
| The debt would not be repaid | 10% |
| Charge against personal assets | 9% |
Source: Scottish Widows Business Protection Research, conducted by YouGov, March 2026 (2,019 GB business owners and senior decision makers).
What does a personal guarantee mean for your family?
A personal guarantee is a promise to repay a business debt yourself if the company cannot. Lenders often ask directors of smaller companies to sign one, and the government's guidance on personal guarantees explains what you are agreeing to.
In many cases, a personal guarantee does not end when you die. Depending on its wording, the lender can claim against your estate. If your estate does not hold enough cash, your executors may have to sell assets, and that can include the family home.
How does business loan protection insurance work?
Business loan protection insurance is life cover, or life and critical illness cover, taken out on a director or owner to match a business debt. If that person dies or is seriously ill, the policy pays a lump sum to the business, which can repay the loan and release the guarantee.
| Illustrative example: £250,000 loan with a director's personal guarantee | Without cover | With business loan protection |
|---|---|---|
| Director dies | Lender can call in the loan | Policy pays £250,000 to the business |
| Loan repayment | Business must find £250,000 | Loan repaid from the policy |
| Personal guarantee | Lender can claim against the estate | Guarantee released once debt is cleared |
| Impact on family | Estate assets, possibly the home, at risk | Estate left intact |
Source: Illustrative example only. Outcomes depend on the loan and guarantee terms.
Should you choose level or decreasing cover?
Match the cover to the debt. Decreasing cover falls in line with a repayment loan and usually costs less. Level cover stays the same and suits overdrafts, interest-only loans or revolving facilities where the balance does not fall steadily.
| Type of cover | How the sum insured behaves | Usually suits |
|---|---|---|
| Decreasing cover | Falls over the term, in line with repayments | Repayment business loans, commercial mortgages |
| Level cover | Stays the same throughout the term | Overdrafts, interest-only loans, revolving credit |
Is business loan protection the same as key person insurance?
No, though they work well together. Business loan protection is sized to a specific debt, while key person insurance replaces lost profit or funds recruitment. Many businesses need both, and our key person insurance guide explains how that side works.
Debt is one of several protection gaps highlighted in the 2026 research. Our business protection statistics for 2026 cover key people, share ownership and income too. If you have signed a personal guarantee, a specialist adviser can help you check what is exposed and what cover would match it. Executive Life is authorised and regulated by the Financial Conduct Authority.
Frequently asked questions
What happens to a personal guarantee when the guarantor dies?
In many cases a personal guarantee does not end on death. Depending on its wording, the lender can make a claim against the guarantor's estate for the amount guaranteed, which may mean assets such as the family home have to be sold to repay it.
Does a limited company protect directors from business debt?
Only up to a point. A limited company is responsible for its own debts, but if a director signs a personal guarantee or secures a loan against personal assets, the lender can pursue the director, or their estate, if the company cannot pay.
What is business loan protection insurance?
Business loan protection insurance is life cover, or life and critical illness cover, that pays a lump sum to the business if a named director or owner dies or is seriously ill. The business uses the money to repay the loan, which can release any personal guarantee.
How many UK businesses have a personal guarantee on their debt?
Among UK businesses with borrowing, 15% expect a personal guarantee to be used to repay it if an owner dies, and 9% have a charge against personal assets. A further 19% are not sure how the debt would be repaid (Scottish Widows / YouGov, 2026).
Should business loan protection be level or decreasing cover?
Decreasing cover usually suits a repayment loan because the sum insured falls as the balance falls, which typically keeps premiums lower. Level cover usually suits interest-only borrowing, overdrafts or revolving facilities where the amount owed does not fall steadily.
Last reviewed: September 2026. Next review: April 2027. Tax rates and thresholds are subject to change.
Written by
Alex Ogden DipFA | Director | Executive Life
Alex Ogden DipFA holds the Level 4 Diploma for Financial Advisers (DipFA) awarded by the London Institute of Banking and Finance (LIBF), the FCA's benchmark qualification for retail investment advisers. He is authorised by the FCA, Ref: AJO01072 (FCA register).
Executive Life is authorised and regulated by the Financial Conduct Authority. This article is for information purposes only and does not constitute financial advice. Tax treatment depends on individual circumstances and may be subject to change. Always seek professional advice before making financial decisions.