Life insurance?

July 21, 2023

by a searcher from University of Virginia-Darden - Darden School of Business in Bethesda, MD, USA

For anyone doing an SBA loan that has gotten their life insurance policy already, is there anything to know or is it pretty straightforward? Thx!

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Reply by a professional
in Dover, NH, USA

Thanks for tagging me! We help searchers every day with the life insurance process for SBA loans. It is relatively straight forward. You’ll want a term policy with a carrier that can process business owned life insurance and will collaterally assign the policy. The collateral assignment is an additional step in the process after the policy is approved and issued where, essentially, the bank will get paid what you owe them first, and then your listed beneficiaries get what’s left of the death benefit. You’ll ideally want to give yourself 30 plus days to have the insurance sourced, approved, placed and collaterally assigned. Not all agents and carriers handle this process well and quickly so find someone that is experienced in processing these type of key person life policies. The less time you give yourself, the less options you will have and can mean delays depending on what sort of medical requirements the carriers may need to approve you. In trying to close a deal, you already have a lot to deal with so don’t let the life insurance piece hold up a close date.

Lastly, look for an true independent broker over an agent for a specific carrier like Northwestern Mutual, New York Life, Mass Mutual, Guardian, Equitable, etc. more times than not, you’ll end up with a policy from the carrier the agent works for whether it was the best option in the market for you or not. A full independent broker can take it to most of the top carriers that handle these sort of policies. Sometimes it’s hard to know if an agent works for a single carrier… good place to start is looking at the fine print at the bottom of their website.

Certainly feel free to DM if you have other questions. Happy to help searchers through the life insurance piece however I can.

Reply by a searcher
from University of Pennsylvania in Atlanta, GA, USA

Hi Jon, Life Insurance ended up being the last checklist item I needed to close my SBA loan and created a lot of stress. Definitely start early and get this out of the way! In my case, they did a terrible job on the medical history and gave me the worst rate and then I had to chase down a bunch of medical records so I could appeal. It came through in the end but I thought it was going to kill my deal at one point (or at least cause me to pay a lot more than I needed to for life insurance). Let me know if you need a rec for insurance broker who was very good expediting as much as he could.

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