Glossary · The loan itself
Term life insurance
In short
This type of life insurance provides coverage for a specific period (the term), paying a death benefit if the insured dies within that term. It's often required by SBA lenders to protect the loan.
What it means in a deal
For 7(a) loans, the SBA often requires the buyer (key principal) to carry term life insurance with an assignment to the lender. This ensures the loan can be repaid if something happens to you. The policy typically covers the loan principal for the duration of the loan.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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 Term life insurance
- When is term life insurance more suitable than permanent life insurance for business protection?
- Why is long-term disability insurance considered a vital complement to business life insurance?
- Is a decreasing term life insurance policy acceptable for the SBA's life insurance requirement on a 7(a) loan?
- Should a business choose term or permanent life insurance for key person protection?
- What are the consequences if I fail to maintain required life insurance collateral during the loan term?
- How does a lender ensure life insurance policies assigned as collateral are properly maintained throughout the loan term?
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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