SBA 7(a) Q&A
Short answer
Yes, 'insurable interest' is a fundamental legal requirement for obtaining any life insurance policy, including those for business purposes.
Insurable interest means that the policy owner would suffer a financial or emotional loss if the insured person dies. For business life insurance, this typically means the business would face financial hardship upon the death of a key employee, partner, or debtor. Without insurable interest, the policy is considered a wager and is void.
A small accounting firm can take out a policy on its lead CPA because her death would lead to client loss and operational disruption, representing a clear financial loss to the firm. However, the firm could not take out a policy on a random person with whom it has no financial ties.
Last reviewed 2026-06-15 · SBA sources checked through 2026-06-15. DealRoom analysis of business life-insurance and SBA collateral-insurance practice (SOP 50 10 8). Not insurance, legal, or tax advice. 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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This page answers “Is "insurable interest" always a legal requirement for obtaining business life insurance?” for SBA 7(a) business buyers — a short answer, the detail, and official sources — from DealRoom.so SBA Intelligence. It is general information, not legal, tax, or financial advice, and DealRoom is not a lender.
Source: DealRoom.so SBA Intelligence, based on public SBA, lender, franchise, FDIC, and related records. DealRoom is not a lender and does not guarantee financing.
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