SBA 7(a) Q&A
Short answer
In a key-person life insurance arrangement, the business typically owns the policy, pays the premiums, and is named as the beneficiary, receiving the death benefit directly.
This structure ensures that the business itself is protected financially from the loss of a critical employee. The policy's cash value, if it's a permanent policy, can also be an asset on the company's balance sheet.
ABC Inc. purchases a $1,000,000 key-person policy on its CTO. ABC Inc. is listed as the policy owner, pays all monthly premiums, and upon the CTO's death, the $1,000,000 death benefit is paid directly to ABC Inc. to help maintain operations.
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 “Who legally owns a key-person life insurance policy and who receives the death benefit?” 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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