Glossary · The loan itself
Decreasing term life insurance policy
In short
A life insurance policy where the death benefit decreases over time, often used to match the declining principal balance of a loan. It ensures the loan is repaid if a key guarantor dies.
What it means in a deal
For SBA 7(a) loans, lenders often require key principals to obtain life insurance, with the decreasing term policy being a common choice. The death benefit reduces as you pay down the loan, aligning with the outstanding balance. The lender is usually the beneficiary or assignee.
Official sources
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Decreasing term life insurance policy
- Is a decreasing term life insurance policy acceptable for the SBA's life insurance requirement on a 7(a) loan?
- Can a term life insurance policy be used for the collateral assignment requirement on an SBA 7(a) loan?
- When is term life insurance more suitable than permanent life insurance for business protection?
- Can a term life insurance policy be used for the required collateral assignment on key principals for a 7(a) loan?
- What defines 'insurable interest' for a business life insurance policy?
- Who is responsible for paying premiums on a business life insurance policy?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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