Glossary · The loan itself
Policy lapse
In short
This occurs when an insurance policy terminates due to unpaid premiums. If your required life insurance policy lapses, it violates your SBA loan agreement.
What it means in a deal
An SBA loan typically requires key person life insurance for a specified period. A policy lapse means the collateral is gone, putting you in default. Set up automatic payments and regularly confirm your policy is active to avoid this serious issue.
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 Policy lapse
- What defines 'insurable interest' for a business life insurance policy?
- Who is responsible for paying premiums on a business life insurance policy?
- Who typically owns the life insurance policy on a seller post-acquisition?
- What is the specific SBA policy document that addresses collateral life insurance requirements?
- Who owns and is the beneficiary of a key-person life insurance policy?
- Are death benefits from a business life insurance policy generally taxable to the recipient?
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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