Guarantee insurance is a type of insurance that covers the damage that the guarantor will suffer if the debt he/she guarantees is not paid. It is not yet widespread in Türkiye, but it is a growing area.
Scope
- Refund of the amount that the guarantor has to pay in case the principal debtor fails to pay
- Enforcement expenses
- Lawyer fees
Typical Usage
- On behalf of the person guarantors in the lease contract
- Guarantee in the bank loan
- Commercial contract suretyship
Insurance Conditions
- Insurance premium
- Maximum compensation amount
- Waiting period
- Exemption
Risk Management Recommendations
- Examine the financial situation of the principal debtor before becoming a guarantor
- Make a "limited suretyship" contract with the principal creditor (specific amount/period)
- Make sure that the consent of the spouse is obtained (TBK art. 584)
- If possible, choose ordinary guarantee rather than several
Banking Legislation
Banks support the guarantees they receive in loan agreements with various guarantees (mortgages, pledges). This reduces the risk of the guarantor.
Financial law attorney is recommended.