Here is a situation we see regularly, and it is the clearest illustration of why we run both practices under one roof.

A promoter takes a working capital facility. The bank asks for a personal guarantee, which is routine. He signs.

The company now has a liability. His family now has a risk. And the two people advising him — his accountant and, if he has one, his protection advisor — each see exactly one half of it.

Why it gets missed

His accountant sees the facility. It is on the balance sheet, it is disclosed, it is entirely visible. But the accountant is not asked about the family’s protection, so it goes no further.

His protection advisor, meanwhile, asks about income, dependants and existing policies. A reasonable set of questions. None of them surfaces a guarantee, because a guarantee is not a personal liability until it is called.

So the largest single exposure in the household never enters either conversation.

What it means in practice

If the promoter dies, the company’s obligation does not disappear. Where the guarantee is invoked, the estate is exposed — which means the family inherits the debt alongside the business, frequently at the moment the business is least able to service it.

The cover required is therefore not a multiple of income. It is:

Income replacement + outstanding personal borrowing + guaranteed business borrowing − existing savings − existing cover

The third term is the one that is almost always zero in other people’s calculations.

Sizing it honestly

A few things are worth doing properly here.

Check what has actually been guaranteed, not what you remember guaranteeing. Facilities get renewed, enhanced and re-documented, and the guarantee travels with them.

Include co-guarantors. If two directors have jointly and severally guaranteed a facility, each is exposed to the whole amount, not half of it.

Revisit it when the facility changes. An enhancement from ₹2 crore to ₹3.5 crore is a protection event as much as a finance one, and nothing in either advisor’s process is likely to flag it.

The uncomfortable arithmetic

For most owner-managed businesses, adding the guarantee to the calculation roughly doubles the cover required. That number is unwelcome, and it is also the point of doing the calculation.

Term cover is the cheapest instrument available for exactly this problem: large sum, defined period, pure protection, no investment component. And it is cheapest at the age you are now.

Why we treat this as one conversation

Because it is one balance sheet. The person who can tell you what has been guaranteed is the person who does your books, and the person who should be sizing cover against it should be reading the same file.

Splitting that across two firms who never speak is how a gap this obvious survives for years.