{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/should-a-business-choose-term-or-permanent-life-insurance-for-key-person-protection","api_url":"https://dealroom.so/api/public/questions/should-a-business-choose-term-or-permanent-life-insurance-for-key-person-protection","question":"Should a business choose term or permanent life insurance for key person protection?","topic":"Business life insurance & protection","audience":"borrower","bot_mode":"buyer","short_answer":"It depends on the specific needs: term insurance is usually chosen for temporary needs like loan repayment, while permanent insurance is better for long-term protection, buy-sell agreements, or cash value accumulation.","rule":"Term life insurance provides coverage for a specific period, making it cost-effective for covering defined risks like a 10-year loan. Permanent life insurance (e.g., whole life or universal life) offers lifetime coverage and accumulates cash value, which can be a business asset or a source of loans, suitable for indefinite risks or succession planning.","example":"A business takes out a 15-year SBA loan, so they opt for a 15-year term policy on the owner. For a buy-sell agreement among partners, they might choose permanent insurance for its indefinite coverage.","what_lenders_check":"Lenders typically prefer term policies that align with the loan term, ensuring coverage exists for the duration of their financial exposure. They may require collateral assignment on any cash value if permanent insurance is used.","required_facts":["Term: temporary needs","Permanent: long-term needs","Term: cost-effective","Permanent: cash value","Loan vs. succession"],"source_families":[],"official_sources":[],"related_questions":[{"question":"What is key-person life insurance and why is it crucial for small businesses?","url":"https://dealroom.so/sba-7a/questions/what-is-key-person-life-insurance-and-why-is-it-crucial-for-small-businesses"},{"question":"Who should a business identify and insure as a key person?","url":"https://dealroom.so/sba-7a/questions/who-should-a-business-identify-and-insure-as-a-key-person"},{"question":"What is the typical amount of key-person life insurance coverage needed?","url":"https://dealroom.so/sba-7a/questions/what-is-the-typical-amount-of-key-person-life-insurance-coverage-needed"},{"question":"Who owns and is the beneficiary of a key-person life insurance policy?","url":"https://dealroom.so/sba-7a/questions/who-owns-and-is-the-beneficiary-of-a-key-person-life-insurance-policy"},{"question":"What are the tax implications of key-person life insurance premiums and benefits?","url":"https://dealroom.so/sba-7a/questions/what-are-the-tax-implications-of-key-person-life-insurance-premiums-and-benefits"},{"question":"Why would a buyer require life insurance on a seller during business acquisition?","url":"https://dealroom.so/sba-7a/questions/why-would-a-buyer-require-life-insurance-on-a-seller-during-business-acquisition"}],"related_terms":[{"term":"Term life insurance","url":"https://dealroom.so/glossary/term-life-insurance"},{"term":"Life insurance","url":"https://dealroom.so/glossary/life-insurance"},{"term":"Decreasing term life insurance policy","url":"https://dealroom.so/glossary/decreasing-term-life-insurance-policy"},{"term":"Key man insurance","url":"https://dealroom.so/glossary/key-man-insurance"},{"term":"Universal life insurance","url":"https://dealroom.so/glossary/universal-life-insurance"},{"term":"Life insurance requirement","url":"https://dealroom.so/glossary/life-insurance-requirement"}],"related_tools":[{"name":"Life insurance coverage estimator","url":"https://dealroom.so/seller-life-insurance#ins-estimator"},{"name":"Request insurance quotes","url":"https://dealroom.so/seller-life-insurance#ins-quote"}],"data_freshness":{"last_reviewed":"2026-06-15","sba_rule_sources_checked_through":"2026-06-15"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/should-a-business-choose-term-or-permanent-life-insurance-for-key-person-protection","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."]}