PGI premiums are underwritten individually. Here is how pricing works, what underwriters look at, and why the same loan size can produce very different quotes depending on the borrower and deal structure.
PGI premiums are priced individually based on the policyholder's risk profile, loan size, industry, and deal structure. Coverage is available up to a maximum limit of $1,000,000, subject to a 20% deductible. All coverage is subject to policy terms, conditions, exclusions, and limits. Underwriting determines final pricing for each application.
The first question most business owners ask is what Personal Guarantee Insurance costs. The answer is a range with defined parameters, because PGI is underwritten like any specialty insurance line. The rate depends on the specific loan, the business, and the guarantor.
Below is how the pricing works, what moves it, and how to think about the cost relative to the exposure it caps.
How Pricing Is Determined
PGI premiums are priced individually based on the policyholder's risk profile. Coverage is available with no minimum, up to a maximum limit of $1,000,000, subject to a 20% deductible. All coverage is subject to policy terms, conditions, exclusions, and limits. Underwriting determines final pricing for each application.
How coverage limits work in practice
The policy maximum is subject to a 20% deductible. This means the portion of any covered loss borne by the insurer is calculated after the deductible is applied. Your underwritten premium and coverage terms are confirmed during the quote process.
How PGI Pricing Works
Premium is calculated on the guaranteed amount and adjusted based on risk factors the underwriter assesses. The rate range reflects the spread between the most and least favorable risk profiles within the underwriting appetite.
Larger guarantee amounts often produce a more favorable rate per dollar. Strong business financials, established industries, and conservative loan structures typically price toward the lower end. Leveraged acquisitions, cyclical industries, and earlier-stage businesses price accordingly.
What Drives Premium
Six factors move pricing within the range:
Larger coverage amounts generally produce a more favorable rate per dollar, consistent with how most specialty insurance lines are structured.
Revenue, profitability, cash flow coverage, and debt service coverage ratio. Businesses with stronger financial performance present a different risk profile than those with thinner margins.
Industries with more stable revenue profiles and lower historical default rates typically price differently than cyclical or higher-turnover sectors.
SBA 7(a) loans in the United States, CSBFP loans in Canada, conventional term loans, and acquisition financing each carry different risk characteristics that affect underwriting.
Personal credit history, net worth, liquidity, and relevant industry experience are considered as part of the underwriting review.
The deductible amount and policy limit affect premium. A higher retained share generally produces a lower annual cost.
How to Think About the Cost
Most owners compare the premium to the exposure it caps. The annual premium is a fraction of the maximum coverage amount it provides. Origination fees, legal costs, and interest payments on the same loan are typically larger expenditures.
PGI converts an open-ended personal liability into a defined, annual line item. For operators who manage their balance sheet with discipline, that trade is comparable to other professional risk costs they carry.
The premium is a known, finite cost. The exposure it caps is an open-ended risk. That is the whole structure of the trade.
For a practical analysis of whether the trade makes sense for your situation, see Is Personal Guarantee Insurance Worth It.
Ways to Lower Your Premium
- Increase the retained deductible. A higher self-insured retention reduces the annual premium, because the policyholder absorbs more of the first loss.
- Choose a lower coverage limit. Insuring a smaller portion of the total guarantee reduces the premium proportionally.
- Apply before closing. Applications submitted before the loan closes often allow the underwriter to assess a cleaner set of facts and may support a more favorable rate.
- Maintain strong business metrics. Improving the business's debt service coverage ratio or strengthening the personal financial profile can support a better pricing outcome at renewal.
Getting a Quote
A formal underwriting indication typically requires the loan documents, recent business financial statements, and a personal financial statement. The underwriter returns coverage options at different deductibles and limits. No obligation arises until you accept a quote and bind coverage.
Start a quote at PGI or contact [email protected] to begin.
Common Questions
PGI premiums are priced individually based on the policyholder's risk profile. Coverage is available with no minimum, up to a maximum limit of $1,000,000, subject to a 20% deductible. Pricing depends on your business profile and is confirmed during your quote.
Underwriting determines final pricing for each application. For most owners with meaningful guarantee exposure, the annual premium is a defined cost that is substantially smaller than the open-ended personal exposure it caps.
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Sources and References
This article draws on publicly available guidance from small business authorities and established financial resources.
- U.S. Small Business Administration. 7(a) loan program. https://www.sba.gov/funding-programs/loans/7a-loans
- Investopedia. Personal Guarantee: Definition and Role in Loan Requirements. https://www.investopedia.com/terms/p/personal-guarantee.asp
- Federal Reserve. Small Business Credit Survey 2024. https://www.fedsmallbusiness.org/