SBA 7(a) Q&A
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.
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.
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.
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 “Should a business choose term or permanent life insurance for key person protection?” 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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