Glossary · People and paperwork
Whole Life Policy
In short
A type of life insurance that provides coverage for your entire life and includes a cash value component that grows over time. The SBA often requires a policy on key principals to protect the loan.
What it means in a deal
For an SBA 7(a) loan, you'll likely need to assign a life insurance policy on yourself (and any other key principals) to the lender as collateral. A whole life policy can fulfill this requirement, but lenders often prefer term life policies due to lower premiums and clearer death benefit. If you already have one, the lender will require an Assignment of policy form.
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 Whole Life Policy
- 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?
- Is a decreasing term life insurance policy acceptable for the SBA's life insurance requirement on a 7(a) loan?
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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