For SBA lenders
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.
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.
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.
Insider move
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.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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