Glossary · Your money in the deal
Universal life insurance policy
In short
This is a type of permanent life insurance with a cash value component that grows over time. Its flexibility allows policyholders to adjust premiums and death benefits.
What it means in a deal
If you're using the cash value from a universal life insurance policy for your equity injection, your lender will verify it's "unencumbered," meaning it's not already pledged as collateral for another loan. You may need to assign the policy to the lender or cash it out. Understand the tax implications and any surrender charges before using it.
Related terms
Common questions about Universal life insurance policy
- What defines 'insurable interest' for a business life insurance policy?
- Can a lender rely on a universal life insurance policy that has a cash value for a collateral assignment on a 7(a) loan?
- Is a decreasing term life insurance policy acceptable for the SBA's life insurance requirement on a 7(a) loan?
- 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?
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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