Your bank wants life cover on the business loan. You don't have to buy it from them.

Sinéad owns a food production company in Kilkenny. She is 44, the business turns over €2.8 million, and she has just agreed a €500,000 ten-year loan to fit out a second production line. The letter of sanction arrives, and among the conditions precedent to drawdown is this one: *life cover of €500,000 on the life of Sinéad, assigned to the bank for the duration of the facility.*

Attached, helpfully, is a quote from the bank's own life company. The relationship manager mentions that going with it "keeps everything in one place" and won't hold up the drawdown.

Every part of that is normal. The condition is legitimate, the assignment is standard, and the quote is a genuine offer. But it is worth being clear that the letter contains two separate things: a requirement, and an offer. The bank is entitled to require the cover. The borrower is entitled to satisfy that requirement with cover from any provider in the market — and under the Consumer Protection Code, the bank cannot require the cover to be written through its own channel.

What the condition actually says

Read the condition again. It specifies an amount, a life, an assignment and a duration. It does not specify an insurer, because it cannot.

Under the Central Bank's Consumer Protection Code, a regulated lender may not make a loan contingent on the borrower buying another product from it — the practice known as contingent selling, or tying. A lender can require that insurance be in place as a condition of credit; the borrower can satisfy that condition with a suitable policy from any insurer in the market, assigned to the lender in the usual way.

For business borrowers, one thing has recently changed, and it is worth knowing about. The revised Consumer Protection Code came into force on 24 March 2026, and with it the definition of "consumer" was widened to include incorporated businesses with annual turnover under €5 million. Sinéad's company — not just Sinéad personally — now sits inside the Code's protections when it deals with a regulated lender. The great majority of Irish SMEs do. The protections that personal mortgage borrowers have had for years at the mortgage desk now clearly extend to the business-lending desk, and they are five months old, which is roughly five months longer than most SME owners have known about them.

None of this makes the bank's quote improper — it is a legitimate offer from a regulated provider. It is simply one quote, from one provider, arriving at the moment when the borrower has the least time and attention to compare it with anything.

Why the envelope matters

We have measured what that leverage costs — in the market where it is easiest to measure.

Our working paper on mortgage protection distribution examined the premiums paid by borrowers who take the lender's policy at the point of loan rather than quoting the market, and found bank-channel premiums running 20–30% above whole-of-market terms for equivalent cover, an aggregate overpayment in the tens of millions a year. The mechanism is not a mystery and it is not misconduct. It is captivity: the policy is offered at the exact moment the customer wants nothing except for the loan to complete, by the institution controlling whether it completes. Nobody shops around while their drawdown date is hostage to paperwork.

Everything about that mechanism operates at the business-lending desk too — usually with more force. The amounts are larger, the timelines are tighter, the borrower is busier, and there is no equivalent of the switching-and-comparison culture that at least exists around mortgages. A sole quote presented inside a letter of sanction is the least price-transparent way to buy a financial product that exists in Ireland, and on a €500,000 ten-year policy, a 20–30% premium gap is not a rounding error. It is thousands of euro over the term, paid for the convenience of not sending one email.

The honest caveat: the bank's quote is not always the dear one. Occasionally it is competitive. The point of our research was never that lender-channel cover always costs more — it is that borrowers who never compare cannot know, and the distribution model is built on them not comparing. The condition in the letter gives you weeks. Getting a whole-of-market comparison takes a day.

What the bank's policy actually protects

Here is the part that matters more than price, and gets discussed less.

Suppose Sinéad takes the cover — from anyone — and dies in year four. The policy pays €500,000, the assignment directs it to the bank, and the loan is cleared. That is a genuinely good outcome: the company owns its production line debt-free and the bank goes away.

But look at what has not been protected. The company has lost its founder, its key customer relationships, its product knowledge and its bank-facing credibility, and it has received precisely nothing — every euro of the payout went to the lender. If profits fall while a successor is found, or suppliers tighten terms, or the family needs to extract value from a business nobody left behind can run, the loan cover is silent. It was never theirs. A policy assigned to the bank protects the bank; the benefit to the business is real but incidental, the way clearing a mortgage benefits a household that has just lost an income.

This is why loan cover is the floor of business protection, not the plan. Key person cover — owned by and payable to the company — replaces the profits and funds the recruitment that a death like Sinéad's actually costs. Shareholder or co-director cover deals with who owns the company afterwards. Our guide, *Business Protection in Ireland*, sets out how the three layers fit together and how each is taxed; the short version relevant here is that premiums on cover securing a loan are generally not deductible against the company's profits, so the cost comparison between quotes is a comparison of after-tax money.

Treating the letter of sanction as the whole conversation is how companies end up insured for exactly one stakeholder's benefit — the stakeholder best able to look after itself.

Getting the structure right

Three practical points before anyone signs anything.

Match the cover to the loan's actual shape. A ten-year facility with straight amortisation suits decreasing cover; a facility with an interest-only period, a bullet repayment or an intended refinance does not, because a decreasing schedule fixed at inception will drift away from the balance it is meant to secure — a failure mode our research on decreasing cover has examined in detail in the mortgage market. Where the loan's future path is uncertain, level term costs a little more and removes the risk of being underinsured at the worst moment.

Do not assign the family's policy to the business. It is sometimes suggested — occasionally by lenders — that an existing personal policy be assigned to satisfy the condition. It can be. It almost never should be. A policy taken out to protect a spouse and children, once assigned, pays the bank first; the family's protection has quietly become the company's collateral. Cover securing a business debt should be new cover, priced for the purpose, so that what was bought for the kitchen table stays at the kitchen table.

The assignment works the same from any insurer. Whichever policy Sinéad chooses, the assignment to the lender is standard paperwork that every Irish life office and every solicitor handles routinely, and a letter confirming cover and assignment satisfies the condition precedent in identical form. Sourcing the policy in the market does not slow the drawdown.

What to do with the letter of sanction

Take the condition seriously — it is a fair one, and the discipline of insuring a key life against a large debt is one many companies should apply to themselves even when no bank demands it. Then treat the quote as what it is: a starting price. Send the specification — amount, term, life insured, assignment required — to a whole-of-market broker, compare like with like, and buy the cover wherever it is best. The bank gets its assignment either way. The only thing that changes is who kept the difference.

We quote the Irish market whole-of-market for business loan cover, key person and co-director protection, every case is reviewed by a QFA, and our *Business Protection in Ireland* guide — covering all three layers, with the full tax treatment — is free to download. No obligation, and no drawdown was ever delayed by asking.