Protection of debit loan accounts

The Need

Businesses sometimes lend money to their owners. This practice is not uncommon. A problem arises if the owner/borrower dies. The business is then faced with the risk that the estate of the owner may not be in a position to repay the money owing to the business.

This puts the estate at risk of being sued by the business to recover the loan. The remaining owners are indirectly at risk. If the business cannot recover the capital, then the remaining owners suffer consequential damages.

Debit Loan Account Solution

The solution is to cover the debit loan account with a policy and to cede the policy to the business as security. Should the lender die, or become disabled, the policy proceeds of the policy can be used to settle the debt. This relieves the owner of the debt, and the business recovers its capital.

The content in this article was provided by Sanlam.

About Sanlam:

Sanlam is a diversified financial services group, headquartered in South Africa, operating across a number of selected global markets.

We have been creating value for stakeholders since 1918 – for more than 100 years. Sanlam is one of the biggest internationally active insurance groups globally, and is classified as a domestic systemically important financial institution in South Africa. We contribute to financial resilience and prosperity in all the markets where we are present.

Sanlam is committed to building a culture of client-centricity, where our Wealthsmiths™ support people in living their best possible lives through financial resilience and prosperity. Our strategy has remained largely unchanged since 2003, and our strategic intent of sustainable value creation for all key stakeholders remains firmly in place.

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