{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/if-life-insurance-is-required-can-an-existing-policy-be-assigned-to-the-lender-and-what-ar","api_url":"https://dealroom.so/api/public/questions/if-life-insurance-is-required-can-an-existing-policy-be-assigned-to-the-lender-and-what-ar","question":"If life insurance is required, can an existing policy be assigned to the lender, and what are the requirements?","topic":"Life insurance","audience":"lender","bot_mode":"lender","short_answer":"Yes, an existing life insurance policy can be assigned to the lender, provided it meets SBA requirements for coverage amount, policy type, and the assignment is properly documented and recorded.","rule":"Lenders may accept an assignment of an existing policy rather than requiring a new one, as long as the policy is acceptable (e.g., term or whole life, not decreasing term that expires before the loan). The assignment must be irrevocable and grant the lender the right to receive proceeds up to the loan balance, with proper notification to the insurance carrier.","example":"A key principal has an existing $1,000,000 whole life policy. The lender requires an executed assignment of policy to be filed with the insurance company, naming the lender as assignee, to meet the SBA's life insurance requirement for a $750,000 loan.","what_lenders_check":"Lenders must verify the existing policy's terms (e.g., coverage, beneficiaries, term) and ensure the assignment is legally effective and recorded, preventing issues with collecting proceeds in case of the principal's death.","required_facts":["Existing policy","Policy assignment","Lender as assignee","Coverage amount","Key principal"],"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":"Whole life insurance policy","url":"https://dealroom.so/glossary/whole-life-insurance-policy"},{"term":"Universal life insurance policy","url":"https://dealroom.so/glossary/universal-life-insurance-policy"},{"term":"Decreasing term life insurance policy","url":"https://dealroom.so/glossary/decreasing-term-life-insurance-policy"},{"term":"Life insurance","url":"https://dealroom.so/glossary/life-insurance"},{"term":"Universal Life Policy","url":"https://dealroom.so/glossary/universal-life-policy"},{"term":"Whole Life Policy","url":"https://dealroom.so/glossary/whole-life-policy"}],"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/if-life-insurance-is-required-can-an-existing-policy-be-assigned-to-the-lender-and-what-ar","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."]}