This cover differs from buy and sell assurance in that it is specific for the person who stands as surety for the business. This logically means the cover needs to cover the amount of debt the business has.
Using the example above, when the company started, Johnny stood as surety for the loan they needed to take out to cover the start up expenses. If he passes away without contingent liability, the bank are able to take the money from his estate. His family can then claim from the business and what was once a thriving business can stand on the brink of bankruptcy.
Contingent liability insurance would mean that the loan is paid in full first. Thus the estate and then the business is not duty bound to honour the debt as it has been paid.