Life Insurance for SBA Loans

2. Don’t List Your Lender As The Beneficiary

Remember, your spouse or loved one needs to be the beneficiary and a collateral assignment needs to be setup for your lender.

If you die, you only want the lender to receive the remaining balance of your SBA loan – the rest should go to your family.

Here’s an example: Let’s say you’re required to get a $500,000 life insurance policy for your SBA loan. Fast forward 5 years and you’ve paid off $400,000 – only $100,000 remaining on the loan. Great job paying it off!

The following day, you get in a horrible accident and die. That’s horrible news, but to make things worse – your lender was the beneficiary. The lender will get all $500,000 of the death benefit instead of the $100,000 balance!

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