Glossary · The loan itself
Universal life insurance
In short
A type of permanent life insurance policy that offers flexible premiums and a savings component. While permanent, the SBA typically prefers term life for its collateral requirement due to simplicity.
What it means in a deal
While Universal Life Insurance can technically fulfill the SBA's life insurance requirement, lenders often prefer term life policies. The cash value component of universal policies can complicate the assignment process. Discuss with your lender which type they prefer to avoid delays.
Related terms
Common questions about Universal life insurance
- When is term life insurance more suitable than permanent life insurance for business protection?
- Can a lender rely on a universal life insurance policy that has a cash value for a collateral assignment on a 7(a) loan?
- 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?
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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