{"ok":true,"canonical_url":"https://dealroom.so/glossary/life-insurance-collateral","api_url":"https://dealroom.so/api/public/glossary/life-insurance-collateral","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"life-insurance-collateral","term":"Life insurance collateral","group":"The loan itself","definition":"A life insurance policy on the borrower or key principal, assigned to the lender. It protects the lender if a key person dies before the loan is fully repaid, ensuring the loan is covered.","what_it_means":"If you are a key principal, the lender will require a life insurance policy equal to the outstanding loan balance for a portion of the loan term. This is a non-negotiable requirement to protect the SBA guaranty. Budget for the premiums as part of your ongoing operating costs.","url":"https://dealroom.so/glossary/life-insurance-collateral","official_sources":[{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"}],"related":[{"slug":"life-insurance","term":"Life insurance","url":"https://dealroom.so/glossary/life-insurance"},{"slug":"assignment-of-policy-form","term":"Assignment of Policy Form","url":"https://dealroom.so/glossary/assignment-of-policy-form"},{"slug":"key-principal","term":"Key principal","url":"https://dealroom.so/glossary/key-principal"},{"slug":"personal-guarantee","term":"Personal guarantee","url":"https://dealroom.so/glossary/personal-guarantee"}],"related_questions":[{"question":"How does a collateral assignment of life insurance protect a lender?","url":"https://dealroom.so/sba-7a/questions/how-does-a-collateral-assignment-of-life-insurance-protect-a-lender"},{"question":"When does the SBA mandate collateral life insurance for business loans?","url":"https://dealroom.so/sba-7a/questions/when-does-the-sba-mandate-collateral-life-insurance-for-business-loans"},{"question":"What is the specific SBA policy document that addresses collateral life insurance requirements?","url":"https://dealroom.so/sba-7a/questions/what-is-the-specific-sba-policy-document-that-addresses-collateral-life-insurance-requirem"},{"question":"What are the SBA's specific guidelines for acceptable collateral life insurance policies?","url":"https://dealroom.so/sba-7a/questions/what-are-the-sba-s-specific-guidelines-for-acceptable-collateral-life-insurance-policies"},{"question":"What specific steps must a lender take to properly assign life insurance as collateral?","url":"https://dealroom.so/for-lenders/questions/what-specific-steps-must-a-lender-take-to-properly-assign-life-insurance-as-collateral"},{"question":"When is term life insurance more suitable than permanent life insurance for business protection?","url":"https://dealroom.so/sba-7a/questions/when-is-term-life-insurance-more-suitable-than-permanent-life-insurance-for-business-prote"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Life insurance collateral","url":"https://dealroom.so/glossary/life-insurance-collateral","source_type":"DealRoom Data"}}