Agency Owner, The Thomas G Sheehan Agency, 27 Glen Road Sandy Hook, CT 06482
Life Insurance can be considered by a lender for collateral purposes generally speaking if it is some type of "Permanent" Life Insurance, that is one of the many types that include some sort of cash accumulation benefit. These can take many forms including Traditional Whole Life, Universal Life and it's many forms or some other type of Variable product. In general, Term Life Insurance, which provided for a death benefit but does not include any form of cas accumulation provision, will more than liklely not be considered as collateral for a loan.
To use life insurance as collateral for a loan, you usually name a relative as the Primary Beneficiary, then fill out a collateral assignment form for the lender. This allows the lender to take whatever part of the death benefit that is needed to pay off your loan, and your Primary Beneficiary will receive the rest.
The Small Business Administration often requests the purchase of a 10 year Term policy, so that they are assured to have their loan paid by the death benefit if you would pass away before the loan is paid off.
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The Small Business Administration often requests the purchase of a 10 year Term policy, so that they are assured to have their loan paid by the death benefit if you would pass away before the loan is paid off.