{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-is-the-requirement-for-a-lender-to-ensure-proper-maintenance-of-life-insurance-collat","api_url":"https://dealroom.so/api/public/questions/what-is-the-requirement-for-a-lender-to-ensure-proper-maintenance-of-life-insurance-collat","question":"What is the requirement for a lender to ensure proper maintenance of life insurance collateral on key principals?","topic":"Life insurance","audience":"lender","bot_mode":"lender","short_answer":"The lender must ensure the life insurance policy remains active and in force for the loan's duration, requiring periodic proof of premium payments and confirmation of assignment validity.","rule":"SOP 50 10 mandates that the lender, as the collateral assignee, is responsible for monitoring the life insurance policy on key principals. This includes verifying that premiums are paid, the policy has not lapsed, and the collateral assignment remains effective throughout the loan term to protect the SBA and lender's interests.","example":"A lender annually requests proof of premium payments from the borrower for the assigned life insurance policy. If payments lapse, the lender takes immediate action to ensure the policy is reinstated or replaced to protect its collateral position.","what_lenders_check":"Failure to monitor the active status of life insurance can result in the loss of critical collateral in the event of a key principal's death, leading to potential guaranty repair or denial.","required_facts":["Active policy","Loan duration","Premium payments","Assignment validity","Key principals","Monitoring responsibility"],"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":"Life insurance requirement","url":"https://dealroom.so/glossary/life-insurance-requirement"},{"term":"Life insurance collateral","url":"https://dealroom.so/glossary/life-insurance-collateral"},{"term":"Collateral Assignment of Life Insurance","url":"https://dealroom.so/glossary/collateral-assignment-of-life-insurance"},{"term":"Life Insurance Collateral Assignment","url":"https://dealroom.so/glossary/life-insurance-collateral-assignment"},{"term":"Life insurance","url":"https://dealroom.so/glossary/life-insurance"},{"term":"Collateral requirement","url":"https://dealroom.so/glossary/collateral-requirement"}],"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/what-is-the-requirement-for-a-lender-to-ensure-proper-maintenance-of-life-insurance-collat","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."]}