{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/are-there-specific-requirements-for-a-lender-to-obtain-and-maintain-a-security-interest-in","api_url":"https://dealroom.so/api/public/questions/are-there-specific-requirements-for-a-lender-to-obtain-and-maintain-a-security-interest-in","question":"Are there specific requirements for a lender to obtain and maintain a security interest in life insurance policies used as collateral?","topic":"Life insurance","audience":"lender","bot_mode":"lender","short_answer":"Yes, lenders must obtain a collateral assignment of the life insurance policy and ensure the policy remains in force, with the lender designated as beneficiary for at least the guaranteed amount.","rule":"When life insurance is required, the lender must obtain a properly executed collateral assignment of the policy. This assignment names the lender as the primary beneficiary for the amount of the guaranteed loan portion or the policy's face value, whichever is less, and gives the lender control over the policy. The lender is also responsible for verifying that premiums are paid and the policy remains active throughout the loan term, or for obtaining appropriate waivers if the policy lapses.","example":"A lender requires a $500,000 life insurance policy for a key principal. The lender obtains a collateral assignment from the borrower, files it with the insurance company, and verifies the lender is listed as the assignee. They then establish a tickler system to annually confirm the policy is in force.","what_lenders_check":"Lenders must ensure the assignment is valid and enforceable. Failure to properly assign the policy, or to monitor its in-force status, could result in the loss of this collateral and potentially lead to a guaranty repair if the principal dies and the policy proceeds are not collectible by the lender.","required_facts":["Collateral assignment","Lender as beneficiary","Policy in-force status","Premium payments","Loan guaranty amount"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"When can a lender require a collateral assignment of life insurance for a 7(a) loan on a non-owner key employee?","url":"https://dealroom.so/for-lenders/questions/when-can-a-lender-require-a-collateral-assignment-of-life-insurance-for-a-7-a-loan-on-a-no"},{"question":"What documentation is required for a lender to properly assign a life insurance policy as collateral for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/what-documentation-is-required-for-a-lender-to-properly-assign-a-life-insurance-policy-as-"},{"question":"What specific details must a lender verify when structuring life insurance collateral assignments for multiple key principals with varying ownership stakes?","url":"https://dealroom.so/for-lenders/questions/what-specific-details-must-a-lender-verify-when-structuring-life-insurance-collateral-assi"},{"question":"When is a collateral assignment of life insurance on a key principal mandatory for an SBA 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/when-is-a-collateral-assignment-of-life-insurance-on-a-key-principal-mandatory-for-an-sba-"},{"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-"},{"question":"What are the specific requirements for life insurance collateral assignment when multiple key principals exist?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-requirements-for-life-insurance-collateral-assignment-when-multiple-"}],"related_terms":[{"term":"Perfect a security interest","url":"https://dealroom.so/glossary/perfect-a-security-interest"},{"term":"Security Interest","url":"https://dealroom.so/glossary/security-interest"},{"term":"Licensing and Regulatory Requirements","url":"https://dealroom.so/glossary/licensing-and-regulatory-requirements"},{"term":"Priority Security Interest","url":"https://dealroom.so/glossary/priority-security-interest"},{"term":"Perfected Security Interest","url":"https://dealroom.so/glossary/perfected-security-interest"},{"term":"Perfect Security Interest","url":"https://dealroom.so/glossary/perfect-security-interest"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/are-there-specific-requirements-for-a-lender-to-obtain-and-maintain-a-security-interest-in","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}