SBA 7(a) Q&A

What proof of insurable interest must a business provide when applying for life insurance on an employee?

Short answer

A business must provide proof of financial loss it would incur from the employee's death, such as their unique skills, contribution to revenue, or the cost of finding and training a replacement.

The rule

Insurable interest must be demonstrated by showing a reasonable expectation of financial detriment if the insured individual dies. This is often documented through job descriptions, financial statements showing revenue contributions, or strategic plans highlighting the employee's critical role.

Facts that matter

Financial loss proof
Unique skills
Revenue contribution
Replacement cost
Critical role

Example structure

A tech company applying for a key-person policy on its lead software developer would submit a detailed job description outlining their unique coding expertise, their role in developing core products, and an estimate of the financial impact (e.g., project delays, loss of intellectual property) if they were to die.

What lenders usually care about

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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AI summary

This page answers “What proof of insurable interest must a business provide when applying for life insurance on an employee?” 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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