SBA 7(a) Q&A
Short answer
Insurable interest exists when the policy owner would suffer a financial loss upon the death of the insured. For businesses, this means the death of a key person would negatively impact the company financially.
The concept of insurable interest ensures that life insurance is not used for gambling on a person's life. A business has an insurable interest in its key employees and owners because their death would result in financial harm, such as lost profits, increased operational costs, or the inability to meet loan obligations.
A manufacturing company has insurable interest in its highly skilled lead engineer because their specialized knowledge is critical to production and their absence would cause significant financial disruption.
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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