Glossary · Doing the deal
Life insurance
In short
A policy that pays a sum of money to beneficiaries upon the insured person's death. For SBA loans, it protects the lender in case of the borrower's death.
What it means in a deal
The SBA requires life insurance on key principals, typically you as the borrower, for the full amount of the loan, assigned to the lender. This ensures the loan can be repaid if something happens to you. This is distinct from "key man insurance" which protects the business itself.
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 Life insurance
- When is term life insurance more suitable than permanent life insurance for business protection?
- How does disability insurance complement life insurance for business protection?
- How does business overhead expense insurance differ from key-person life insurance?
- Is a decreasing term life insurance policy acceptable for the SBA's life insurance requirement on a 7(a) loan?
- Why is long-term disability insurance considered a vital complement to business life insurance?
- How are appropriate business life insurance coverage amounts calculated?
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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