{"ok":true,"canonical_url":"https://dealroom.so/glossary/life-insurance-requirement","api_url":"https://dealroom.so/api/public/glossary/life-insurance-requirement","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-requirement","term":"Life insurance requirement","group":"The loan itself","definition":"The SBA's mandate that borrowers with an ownership stake of 20% or more obtain life insurance to cover the outstanding loan balance. This protects the lender if a key principal dies.","what_it_means":"If you're a Key Principal with 20% or more ownership, the SBA requires you to obtain life insurance, with the lender as the beneficiary. The policy must cover at least the SBA portion of the loan or your pro-rata share. This is a condition precedent to closing and must be assigned to the lender.","url":"https://dealroom.so/glossary/life-insurance-requirement","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":"key-principal","term":"Key principal","url":"https://dealroom.so/glossary/key-principal"},{"slug":"universal-life-insurance","term":"Universal life insurance","url":"https://dealroom.so/glossary/universal-life-insurance"},{"slug":"life-insurance-assignment","term":"Life insurance assignment","url":"https://dealroom.so/glossary/life-insurance-assignment"}],"related_questions":[{"question":"Is a decreasing term life insurance policy acceptable for the SBA's life insurance requirement on a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/is-a-decreasing-term-life-insurance-policy-acceptable-for-the-sba-s-life-insurance-require"},{"question":"Is \"insurable interest\" always a legal requirement for obtaining business life insurance?","url":"https://dealroom.so/sba-7a/questions/is-insurable-interest-always-a-legal-requirement-for-obtaining-business-life-insurance"},{"question":"Can a borrower's existing personal life insurance policy be used to satisfy the SBA's life insurance requirement for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-borrower-s-existing-personal-life-insurance-policy-be-used-to-satisfy-the-sba-s-life"},{"question":"What is the requirement for a lender to ensure proper maintenance of life insurance collateral on key principals?","url":"https://dealroom.so/for-lenders/questions/what-is-the-requirement-for-a-lender-to-ensure-proper-maintenance-of-life-insurance-collat"},{"question":"Can a term life insurance policy be used for the collateral assignment requirement on an SBA 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/can-a-term-life-insurance-policy-be-used-for-the-collateral-assignment-requirement-on-an-s"},{"question":"Under what circumstances can a lender waive the life insurance requirement for a 7(a) loan on a key principal?","url":"https://dealroom.so/for-lenders/questions/under-what-circumstances-can-a-lender-waive-the-life-insurance-requirement-for-a-7-a-loan-"}]},"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 requirement","url":"https://dealroom.so/glossary/life-insurance-requirement","source_type":"DealRoom Data"}}