{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-requirements-for-naming-the-lender-as-the-loss-payee-on-a-life-insur","api_url":"https://dealroom.so/api/public/questions/what-are-the-specific-requirements-for-naming-the-lender-as-the-loss-payee-on-a-life-insur","question":"What are the specific requirements for naming the lender as the loss payee on a life insurance policy collateral assignment?","topic":"Life Insurance","audience":"lender","bot_mode":"lender","short_answer":"The lender must be named as the sole assignee on the life insurance policy for an amount at least equal to the guaranteed portion of the loan, and the assignment must be acknowledged by the insurance carrier.","rule":"When life insurance is required as collateral, the lender must obtain a Collateral Assignment of Life Insurance. This legally transfers the policy's benefits to the lender up to the amount of the assignment. The assignment must be properly executed, acknowledge the lender's interest, and be recorded by the insurance company to be effective.","example":"A $1M 7(a) loan with a 75% guaranty requires life insurance on the key principal. The lender ensures the Collateral Assignment of Life Insurance form names 'ABC Bank' as the assignee, for an amount not less than $750,000. The assignment is signed by the borrower and acknowledged in writing by the insurance carrier before closing.","what_lenders_check":"Lenders must ensure the assignment is valid, enforceable, and correctly documented to protect their interest. Errors in the assignment or failure to obtain proper acknowledgment from the insurer can result in a loss of collateral and potentially a guaranty repair.","required_facts":["Collateral assignment","Lender as sole assignee","Guaranteed loan portion","Insurance carrier acknowledgment"],"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":"How does a lender ensure proper collateral assignment of life insurance on multiple key principals?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-ensure-proper-collateral-assignment-of-life-insurance-on-multiple-key-pr"},{"question":"How does a lender ensure sufficient life insurance coverage for multiple key principals with varying ownership stakes?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-ensure-sufficient-life-insurance-coverage-for-multiple-key-principals-wi"},{"question":"Under what specific circumstances can a lender waive the life insurance requirement for a key principal on a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/under-what-specific-circumstances-can-a-lender-waive-the-life-insurance-requirement-for-a-"},{"question":"How should a lender structure the beneficiary and assignment of life insurance on a key principal for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/how-should-a-lender-structure-the-beneficiary-and-assignment-of-life-insurance-on-a-key-pr"},{"question":"When is life insurance required as collateral for key principals with less than 20% ownership in a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/when-is-life-insurance-required-as-collateral-for-key-principals-with-less-than-20-ownersh"},{"question":"When is life insurance on key principals a mandatory loan condition?","url":"https://dealroom.so/for-lenders/questions/when-is-life-insurance-on-key-principals-a-mandatory-loan-condition"}],"related_terms":[{"term":"Loss payee","url":"https://dealroom.so/glossary/loss-payee"},{"term":"Call on the guaranty","url":"https://dealroom.so/glossary/call-on-the-guaranty"},{"term":"Claim on the SBA Guarantee","url":"https://dealroom.so/glossary/claim-on-the-sba-guarantee"},{"term":"Specific Lien","url":"https://dealroom.so/glossary/specific-lien"},{"term":"Useful Life of the Asset","url":"https://dealroom.so/glossary/useful-life-of-the-asset"},{"term":"Loss exposure","url":"https://dealroom.so/glossary/loss-exposure"}],"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":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-requirements-for-naming-the-lender-as-the-loss-payee-on-a-life-insur","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."]}