Can A Life Insurance Policy Be Used As Collateral?

  1. 1492 POINTS
    Jeff Davis
    Insurance Advisor, Lordship Insurance Services, California
    It will depend on the type of policy you own. Term Insurance policies have no cash value and offer pure insurance coverage. If you purchase whole life or universal life insurance there is a cash accumulation account associated with the policy. This cash value is actual cash that is available to the owner (less any fees to cash policy in). These cash funds can be used in certain situations as collateral for a loan.
    Answered on November 16, 2013
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  2. 63333 POINTS
    Peggy Mace
    Most of the U.S.
    The SBA (Small Business Administration) does often require life insurance as collateral for a loan. If they loan is short term, they will take life insurance policies as short as 10 year term or less. You fill out a collateral assignment form that designates that they will get the amount owed to them, should you die. Then your beneficiary will get the rest.
    Answered on November 16, 2013
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