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The E-cigarette and Life Insurance— Why Prudential is the Logical Choice

Alternatives to smoking tobacco have risen to greater prominence over the past decade, and among them is the increasingly popular electronic cigarette. Even most non-smokers these days are aware of this “E-cigarette” (Electronic Cigarette). Even though these cigarettes only simulate actual smoking tobacco through their own vapor-making devices and many do not actually release any nicotine, it is the unfortunate truth that many life insurance companies do not distinguish between e-cigarettes and regular cigarettes.

Because of this, just about every life insurance company out there will give you smoker rates. Because these rates are much more expensive than non-smoker rates, it is important to know your options. (more…)

Life insurance companies are very interested in your job. When you apply for coverage, it's their mission to determine how much risk that you are for insurance coverage. Depending on your job, they might view you as a high-risk applicant. If that's the case, then you can expect to pay a drastically higher rate for your life insurance coverage. There are hundreds of jobs that could put you in the "high-risk" category, and one of those is being a helicopter pilot.
If you're a pilot of any kind, you can expect to pay more for your insurance protection, but that doesn't mean that you have to pay a fortune for your insurance coverage every month. There are a couple of ways that you can secure lower rates and keep more money in your pockets.
This article is going to look at the different options for life insurance and ways that you can get cheaper rates. Making a few changes could save you thousands of dollars every year. Life insurance is one of the most important investments that you'll ever make for your loved ones. It's one of the few ways that you can ensure that your family has the money that they need, even if something tragic were to happen to you. (more…)

Choosing the right life insurance company is important, however if you are a scuba diver it is especially important for you to find the company that will be most favorable to you based specifically on several factors. Here are some tips to get the best rates for life insurance for scuba divers.

What Life Insurance Companies Will Want to Know

Life Insurance companies have different criteria for how they will price your policy based on how many times a year you scuba dive. They will also want to know what your maximum dive is, if you are certified, and what type of environments you dive in. For example, are you scuba diving as a rescue diver, or scuba diving in overhead environments such as cave, wreck, ice or salvage?
Life insurance companies treat scuba diving risk differently. For example with ING a scuba diver can qualify for Super Preferred without restriction on the nScuba Diverumber of dives he/she does each year. ING also allows a maximum depth of 100’ without an increase in the rate as long as the scuba diver is certified.  This is an example of life insurance company that is more liberal towards scuba divers. Met Life will only approve a scuba diver for Standard Plus and would not be the best choice as a life insurance company for scuba divers. Knowing which life insurance company to choose as a scuba diver can make a big difference in your final rate. Our expertise is in helping you get the best rate for life insurance based specifically on your diving history and habits.

Life Insurance for Scuba Divers Quotes

Fill out our Quote Request form below and we will help you find the best rates for life insurance.

 
Transcription of Video:
 
Hello. This is Liran Hirschkorn from ChooseTerm.com
If you are a scuba diver looking for life insurance, you definitely want to
make sure that you find the right life insurance company for you. What do I
mean by that? Insurance companies view the risk of scuba diving
differently, and in turn, charge different rates based on the type of scuba
diving that you do.
When you are looking for a policy, insurance companies are going to want to
know the following: How many times a year you dive? The types of diving
that you do; is it open water, rescue diving, in caves? What kind of diving
do you do? How deep you dive, is it 75 feet, up to 100 feet, over 100 feet?
If you are certified, and how long you have been diving perhaps, as well.
These are questions that you are going to have to answer, and based on that
the insurance companies will evaluate the risk and figure out what to
charge you. Fortunately, at ChooseTerm.com, we work with about 30 different
companies. As an example, ING you can get a super-preferred non-tobacco
rate with ING being a scuba diver, diving as many times as you want per
year, up to 100 feet. With MetLife, for example, they limit the amount of
times they will let you dive, I believe it is 10. You start off at a lower
health rating, which means a higher price.
Some companies allow you to dive up to 75 feet with no increase in price,
some companies let you dive up to 100 feet. When you are looking for life
insurance, you want to make sure that you work with an agent that has
access to a lot of different companies and knows the underwriting
guidelines of those companies, when it comes to scuba diving.
At ChooseTerm.com, we work with about 30 different companies, we understand
how they underwrite scuba divers, and we know which company to go with,
based on your situation. Of course, we will also talk to you about your
other needs: Do you have any other health issues? How much coverage are you
looking to get? How much coverage do you need? What policy works best for
you. These are all the things that we will talk to you about when you call
and speak to us about life insurance policy.
You can visit our website, ChooseTerm.com.
My name is Liran Hirschkorn, from ChooseTerm.com, I look forward to helping
you with your life insurance needs. Thank you.

Many people tend to only think of family when it comes to life insurance, but if you co-own a business or are a partner in one, ensuring its financial future is important. Just as you want to make sure your family will be taken care of should anything happen to you, you want to make sure that your business will be in safe hands and can continue without interruption due to the loss of one partner. Term life insurance that covers each business partner is the key.
But to understand why you need term life insurance, you first you need to understand what a buy-sell agreement is.

What is a Buy-Sell Agreement?

In the most basic of terms, you/your partner are obligated to buy and the heirs are obligated to sell— hence, the buy-sell agreement.
This type of coverage is ideal for business partners, since the loss of one of you often means significant loss for the business as far as its operations are concerned. A buy-sell agreement in a life insurance policy ensures that ownership of the business can transition smoothly. It is essentially a contract between business partners in which you agree (are obligated) to purchase the business share left behind by whomever passes away first. In this case, the deceased partner’s heirs are also under obligation to sell this interest. Your business attorney would help set up this agreement.
As basic as this agreement essentially is, you may be wondering by now what happens if you can’t exactly afford to buy your partner’s share after they pass. This is where term life insurance comes in.

What is Term Life Insurance?

Term life insurance gets its name from the fact that the insurance policy is for a predetermined time period, although it often can be extended or converted to permanent coverage. Term life insurance ensures that your beneficiaries will get a substantial death benefit (a payout) in the event that you pass away during this set time period. You pay an annual rate for this coverage, and this usually consists of monthly installments that are usually fixed for the term length of the policy – anywhere between 10 to 30 years. Overall, term life insurance is considered the simplest, most manageable life insurance option.

Why You Should Choose Term Life Insurance for Your Business

For most businesses, term life insurance is the smartest choice when thinking about the future. You and your business partner can choose the term you want, as well as set the price at which your shares will be bought and sold. This doesn’t have to be a fixed price; the buy/sell agreement can include a formula to value the business, such as a multiple of sales.
Premiums for term life insurance often add up to being lower than the cost of a partner’s share, and the death benefit payout is typically free of income tax. These benefits will immediately provide the surviving partner with the funds they need to purchase the deceased partner’s share of the business.
Let’s look at an example. Say George is currently the co-owner of a successful restaurant with his friend and business partner, Steve. The two of them decide to make their future significantly more secure by purchasing term life insurance policies with a buy-sell agreement. Both men are 40 and are healthy, nonsmokers, so they will likely receive the following offers for $250,000 20 year term policies (an amount that is estimated to cover the cost of a share and its interest).
SBLI: $17.84 per month
Banner Life: $18.38 per month
Protective Life: $18.79 per month
Transamerica: $20.78 per month
American General: $21.29 per month
MetLife: $21.74 per month
Now, say both men decide to go with Banner Life and each pay that rate for 15 years, when George is tragically killed in a car accident. Steve then gets the insurance policy payout and uses it to pay George’s heirs (in this case, his children) for his late partner’s half of the business. The heirs are then unburdened by having it, and they get a nice lump sum as payment. Meanwhile, Steve is able to continue running the restaurant or even sell it, now that he has complete control over it and doesn’t have to worry about the heirs coming after it.
To learn more about buy-sell coverage and the different types, here's a great resource.
You should also consider key man life insurance to help keep the business running and be able to hire for your partners roles.  Most companies with a buy-sell in place, also have key person coverage to protect their business.

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This is a common question in the racing community. Racecar drivers put themselves in high-risk situations for a living. In addition to the obvious risk of becoming injured in crashes, drivers are prone to blood clots and other illnesses from spending so much time seated with little movement. Breathing in the fumes from the driving course can also cause health issues, as racecars do not have the filters and cabin ventilation systems that regular automobiles do.
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So naturally, racecar drivers do face more difficulties when it comes to getting approved for life insurance. Some insurance companies will even automatically refuse someone who races for a living because they deem the risk too high. But if you are a driver, don’t despair just yet. Certain insurance providers do offer coverage for those in your profession, and if you know what to expect, the better equipped you will be to ace the insurance application.

What Are Insurance Companies Looking At?

In addition to the regular insurance application, you will have to fill out an additional form that will go into detail about your racecar driving. The exact information needed will depend on the company you are applying to and the amount of coverage you want, but you should be prepared to address the following questions:
1. What kind of a track do you drive on? (Is it a permanent or temporary course? What shape is it? Are there hills?)
2. What kind of training have you had in this sport, and what equipment do you use?
3. Is this your full-time occupation, part-time job, or is it a hobby?
4. Have you been in any accidents, and if so how many? (All accidents will need to be documented if they resulted in you receiving medical attention).
5. Do you race in only legally sanctioned events?
6. What kind of vehicle(s) do you use for racing? (Make and model, horsepower, engine displacement, speed, etc.)

The Review Process

Keep in mind that getting reviewed and approved for life insurance is not a speedy process. You should not start this process if you are not ready to get insurance coverage within a month, as it is inconvenient for everyone (you included) to keep doing it over and over. If you don’t want your coverage to start until months from now, wait until closer to that time to apply. After all, both your personal needs and your driving record can change between now and then.
When you go through us for your life insurance needs, we will start by going over your basic information (age, health history, etc.). Then, the information about your racecar driving experience will be collected and reviewed. Take a look the above questions to know what to expect here. Once we have all the information we need and have reviewed it, we will begin looking at the list of insurance providers we represent in order to find the right fit for you. Their policies will be carefully gone over to make sure your application only goes to companies that have no restrictions prohibiting them from insuring racecar drivers.
 

There are several components to understanding life insurance for active military members. There’s SGLI, VGLI, conversion options and other components you need to understand so that you can make the best decision for you and your family.But unless you've looked at everything carefuly it can be confusing to understand. In this blog post, I’m going to make sense of it all. I’ll explain how Servicemembers Group Life Insurance (SGLI) works. Your options to convert SGLI to Veterans’ Group Life Insurance (VGLI) when you retire, as well as options for coverage for individual term life policies that you might want to consider. I’ll cover the pros and cons of all options and give you the information you need to make an educated decision on life insurance coverage while in active duty.

Understanding SGLI

SGLI is group life insured offered to servicemembers - both active duty, ready reserves, and the National Guard.

Highlights of SGLI

 

  • Offered in $50,000 increments up to a maximum of $400,000.
  • No medical exam required to qualify
  • Premiums are the same for everyone regardless of age

I recommend that you take advantage of SGLI. However if you need more than $400,00 in life insurance coverage, I also recommend buying an individual term life insurance policy, which I will discuss options for further in this blog post.

What Happens When You Retire?

When you retire from the military you have the option to convert your SBLI coverage to a term or permanent life insurance policy with the VGLI (Veterens’ Group Life Insurance). Here is where I believe the good deal of the SGLI becomes a not such a great deal anymore.

Understanding VGLI

If you want to convert your SGLI to a term life policy with the VGLI you do get some benefits. Just like with the SGLI there is no medical exam required. In addition smokers get the same rates as non smokers, which is not typical with life insurance. However unlike the SGLI the rate isn’t the same regardless of age. What’s worse is that you can’t lock in your rate - it increases every 5 years as you age. The result is that if you are 40 years old the price might seem reasonable, but by the time you reach 55 the price may not be affordable.
For example at age 40 VGLI is $68 per month for $400,000 policy. Sounds reasonable right? At age 45 the price increases to $88 per month, and at age 50 the price goes up to $144 per month. By 55 years old VGLI increases to $268 per month, and $432 per month by age 60. By the time you reach age 70, you will pay $900 per month for life insurance! That’s insane and not cost effective.

The Solution

The solution is that you are better off buying a 20 or 30 year term policy, which allows you to lock in the price for the entire period. For example, a healthy 40 year old would pay $47 per month for a $400,000 30 year term policy. Much better than the price of VGLI. The only time I would recommend VGLI is if you aren’t healthy and you can’t get approved for an individual term life policy.

Life Insurance Options for Active Military

If you are in the military and need more coverage than SGLI offers, or want to lock in on a rate for a policy so that you don’t have to go with VGLI Life Insurance for Military Servicememberswhen you retire there are a few options. Only a few life insurance companies insure active military personnel - such as USAA, MetLife, and Prudential. Let’s compare rates among all 3.
A 45 year old male in active duty, looking for a $500,000 life insurance policy for a 20 year term at Preferred Plus Non Tobacco rates would pay:

  • $58 per month with MetLife
  • $60 per month with USAA

At ChooseTerm.com we represent both MetLife and Prudential. Our experience has been that you typically will get better rates with MetLife and Prudential because USAA has strict underwriting guidelines and it isn't that easy to qualify for their best rates. Our experience has also been that USAA takes longer to get people approved than Prudential and MetLife.
You can qualify for life insurance as an active duty servicemember even if you have deployment papers. As long as you sign the application while you are in the U.S you are eligible to apply for coverage. If you participate in high risk activities in the army like parachuting, you may be subject to additional fees.
If you are looking for a term life insurance policy and are active duty or retired military personnel we can help. We can help you find the best term life insurance rates.

When most people think about why someone may have been turned down for life insurance they typically think that health reasons are the reason why. While health is a major contributor to why people may get declined for life insurance, it isn’t the only reason. In this article, I’ll cover the top 5 reasons people are turned down for life insurance, and also provide tips for what you can do to get approved for a life insurance policy.

Getting Declined for Life Insurance Due to a Health Condition

The most common reason that people get declined for life insurance coverage is because they have a specific health condition that gets them declined. For example someone who has cancer, or has had a heart attack recently might get declined for a traditional life insurance policy. There are however people who get declined for life insurance simply because they applied with the wrong insurance company. Not every life insurance company deals with high risk life insurance, and if you applied with companies like Allstate or State Farm and they declined you, it is possible you may get approved by another company. If you do have a health condition, I recommend that you work with a high risk life insurance agent that can help figure out what the best course of action is to get you approved for life insurance. If you can’t get approved for a traditional policy, there might be alternatives, such as a graded death benefit policy.

Declined for Life Insurance Due to High Risk Activities

If you are involved in high risk activities you may get declined for life insurance. For example while most insurance companies will insure scuba divers, it all depends on the type of diving you do (open water vs cave diving), the amount of times you dive a year, where you dive and how deep you dive. If you travel internationally, or live abroad for a certain time of the year, some insurance companies will not want to insure you. Actively deployed military personnel may have a hard time getting approved for insurance, unless you are working with insurance companies that would still insure you, such as Prudential or Metlife. If you participate in high-risk activities, we can help you find an insurance company that will cover you. Contact us here.

Declined for Life Insurance for Financial Reasons

To get approved for life insurance, there has to be financial justification. For example, someone earning $25,000 per year would most likely not qualify for a $1,000,000 life insurance policy since you can typically get coverage of anywhere between 10-30 times your annual income, depending on your age. If you don’t have an income, but your spouse does, you can typically get as much coverage as your spouse. If you don’t have income and can’t financially justify the need for life insurance, you might get declined for a life insurance policy.

Declined for Life Insurance due to Bankruptcy

If you have filed for a Chapter 7 bankruptcy, you will typically get declined for coverage until the proceedings have been discharged for at least 12 months. If however you are in the midst of a chapter 11,12,or 13 bankruptcy proceeding, you might be able to qualify for coverage if you are making regular debt payments.

Declined for Life Insurance because of a DUI

It is possible that you may get declined for life insurance with a history of one DUI or more. If you have had more than 3 DUIs in the last 10 years, every insurance company would decline you. However if you have one or two DUIs over the last 10 years, some insurance companies will decline you, while others may not. If you have been declined due to a DUI it is possible you applied with the wrong insurance company. Contact Us if you have gotten a DUI and we can help you obtain coverage.

Declined for Life Insurance with a Criminal Record

If you have a criminal history you may get declined for life insurance. Typically the difference between an approval and a decline is dependent on a couple of factors. First, how long has it been since you were convicted, and second what kind of conviction was it. If you have had multiple felonies, you will likely get declined. If however you have had one felony, or one or two misdemeanors, you might be able to get approved for coverage depending on how long ago your probation ended.

Declined for Life Insurance for Drug or Alcohol Abuse

If you currently abuse drugs or alcohol, you will get declined for life insurance. If however you have been drug free for 3 years or more, or have stopped abusing alcohol for over two years, you should be able to get approved for a life insurance policy.

What to do if You Have Been Declined for Life Insurance

The first step you should take is find out why you were declined for coverage. The insurance company that declined you should send you a letter in the mail. While one company declined you, it doesn't mean that every other life insurance company will decline you as well - especially if you applied with companies that have strict underwriting guidelines, like State Farm, or Allstate.
I recommend speaking with a high risk life insurance agency to see if they think you can get approved with another life insurance company. You will want to work with an agency that has access to multiple life insurance companies, and understands high risk life insurance - such as ChooseTerm.com. If it is determined that you might be able to get approved with another company, go ahead and apply for coverage.

What If You Can’t Get Approved With Another Life Insurance Company?

If its been determined that you can’t get approved for a life insurance policy, you still have options. You can look to apply for a Graded Life Insurance Policy or Guaranteed Issue life insurance policy.

What is Graded Life Insurance - Simplified and Guaranteed Issue.

 
A graded life insurance policy is designed for those that can’t get approved for a regular life insurance policy. Simplified Graded life insurance policies ask you a series of questions needed to qualify for coverage. Qualifying for coverage is likely for most people that have been declined for a regular policy, although there are certain times when you wouldn't get approved for a Graded policy - for example if you are currently getting treatment for cancer. In cases where you can’t get approved for a Simplified Issue policy, you can try for a Guaranteed Issue policy. Guaranteed issue policies also have an initial waiting period, but are “guaranteed issue” - meaning anyone can qualify for coverage.
Besides the initial waiting period that graded policies have, they typically also have a limit of how much coverage you can get. While one company may offer up to $25,000 of coverage, another may offer $100,000 - but you generally won’t find graded policies for over $100,000. If you need more coverage than that, you might need to get multiple policies.

Accidental Death Benefit Life Insurance

Another alternative to a traditional life insurance policy is getting an accidental death benefit policy. As the name implies, accidental death benefit policies only covers death in cases where death results from injury or accident. However there are no qualifications needed to be able to get an accidental life insurance policy and if you have exhausted options for getting a traditional policy, or want more coverage than available with a graded death benefit policy, look to get an accidental life insurance policy. They are fairly inexpensive compared to a regular life insurance policy.

Getting Approved for Life Insurance with a DUI

You might be reading this article because you have been declined for life insurance due to a DUI. It’s very likely that the reason you got declined is that you applied with the wrong life insurance company. It isn’t your fault. The agent you were working with was probably not knowledgeable on how to get you approved for life insurance with a DUI. When it comes to life insurance and a DUI/DWI, choosing the right company to work with is the key difference between getting approved or declined for life insurance.

Prudential Life Insurance with a DUI Life Insurance DUI

While several life insurance companies won’t insure you if you have had a DUI in the last 12 months, even the ones that will insure you will charge you an extra fee called a Flat Extra. Rather than discussing those companies, I’ll go over the one company that will be the best choice for life insurance with a DUI, and that company is Prudential Life Insurance (source).
I’ll now discuss the underwriting guidelines of Prudential when it comes to a history of a DUI and also gives some examples of pricing, so that you have an understanding on how their ratings affect the pricing of a life insurance policy with a history of a DUI.
Before I get into the kind of pricing you can expect, here are some factors that will affect the pricing of your policy and the ability to get approved at the best rates.

Factors that Affect Pricing for Life Insurance with a DUI

  • Your Current Age
  • DUI History- How Many DUIs have you had? When?
  • History of Alcohol Abuse? Treatment?
  • Results of a Liver Enzyme Test – The insurance company will test for level of liver enzymes.
  • Driving Record – History of moving violations, speeding tickets?
  • Criminal Record?
  • Any Health Conditions?

Assuming that the above items aren’t a factor, here is what you can expect with Prudential for life insurance with hisotory of a DUI.
If your DUI is over 10 years old, it won’t negatively impact you with Prudential, as well as most other life insurance companies. Also if you have had more than two DUIs over the last 10 years, you won’t get approved for life insurance with Prudential, or any other company. If that is the case, we will need to explore a Graded Death Benefit Life Insurance Policy. Here are the guidelines for Life Insurance with one DUI, and Life Insurance with 2 DUIs over the last 10 years.

Life Insurance with One DUI

  • If your DUI has been in the last 12 months you can expect a Table 2 (also called a Table B) rating.
  • If Your DUI has been over 12 months ago, you can expect a Standard Plus health rating.
  • If your DUI is over 3 years old, it is possible for you to get a Standard Health Rating.

What does this mean in terms of pricing for term life insurance? Here are some examples:

Term Life Insurance with a DUI

Let’s take a look at an example of a 35 year old Male applying for a $500,000 20 year term life policy:

  • $500,000 20 Year Term Life for 35 Year old Male at Table 2 Rating = $98.10 Month
  • $500,000 20 Year Term Life for 35 Year old Male at Standard Plus Rating = $51.75 Month
  • $500,000 20 Year Term Life for 35 Year old Male at Standard Rating = $65.70 Month

Life Insurance with Two DUIs

If you have two DUIs in the last 10 years, Prudential will offer you the following ratings:

  • If the most recent DUI is within the last 5 years, you can expect a Table 5 (or table E) rating.
  • If your most recent DUI is over 5 years old, you can expect a Table B (or Table 2) rating.

What does this mean in terms of pricing? Let’s go back to the example of our 35 year old male with a $500,000 20 year term life insurance policy.

  • $500,000 20 year term life for a 35 year old male at a Table E Rating: $159.30 Month
  • $500,000 20 year term life for a 35 year old male at a Table B Rating: $98.10 Month

The difference between getting approved for term life insurance with a history of a DUI is the difference between working with the right insurance agent or wrong insurance agent. At ChooseTerm.com we are experts in helping people with a history of a DUI in getting approved for life insurance.
Fill out our Contact Us form and we can help you get approved for life insurance with a DUI.

I made this video to provide tips for anyone seeking to get an assignment of life insurance as collateral.

Transcript: Assignment of Life Insurance as Collateral

If you recently applied for a business loan, especially an SBA loan, you might need to get a life insurance policy. In this video, I'm going to give you some tips.
So you may have recently applied for a loan, especially a loan through the SBA, the small business administration, and didn't realize that one of the requirements would be for you to have a life insurance policy. This would be so that if something were to happen to you, the SBA or the lender would get their money back on the loan. Makes sense. So what are some tips, what are some things you can do to speed up the process. Most business owners that I meet want to get that loan in place as soon as possible. So if you are in that situation what I'd recommend is look for a no medical life insurance policy. With a no medical life insurance policy the underwriting time is much faster.
Let's talk a little bit about the underwriting process. The underwriting process with a traditional life insurance policy requires you to get a medical exam. The insurance company very well many times orders your doctor's records. This can take anywhere between a month, and sometimes two months. Sometimes I see it go even longer if the doctor takes time to get your medical records to the insurance company. So this can certainly be a lot of time, and time is money in your business. So what are some options?
Well, one option is to get a no medical life insurance policy and there are some insurance companies out there that can approve you in as little as one to two days, you get your policy and the pricing is still very very competitive.
The other type of policy you can get where the prices are a little bit better is a no medical life insurance policy, that doesn't require a physical exam but the insurance companies will still go to your doctor to get records. This will keep your costs lower than the one to two day policy, but the underwriting time will be still less than a traditional policy. The underwriting time is usually 3-4 weeks instead of possibly six weeks so you're going to get your policy still faster, and you're going to be able to save some money.
If time is not a factor than having a physical and going through the full underwriting process will be your best best, because that's going to be typically your least expensive option. So typically when people are getting loans from banks they're not for a very very long time, so people are typically looking for 10 year term polices, so that's what I would advise you to get because that's going to cover the amount of the loan.
What you would do is, you would do something called a collateral assignment policy, which I would help you do. What does that mean? That means that once you get your policy, I help you fill out a form with the insurance company which will put that policy as collateral for the loan, and that will fulfill the bank's requirements. So I will help you through the process of fulfilling the bank's requirements so that you can get your loan. I have experience working with people that are looking for life insurance specifically to cover a loan, and so if you are in that situation, visit the site Chooseterm.com and fill out a quote request form and I can help you get a life insurance policy which will satisfy the bank's or the lender's requirements, or the SBA's requirements so that that policy could be collateralized for your loan and then you can get approved for your loan as soon as possible. I look forward to speaking with you. Thank you.
Author: Liran Hirschkorn

Life Insurance for Small Businesses

 
If you are a small business owner it’s likely that you may have considered getting a small business loan or are considering getting one now. Many business owners get loans directly from their bank, or through the SBA (Small Business Administration) which is a government program that works along with banks to lend money to small businesses.

SBA Life Insurance: Why Banks and Lenders Require It

 
If the success and profitability of your business relies heavily on you being active in the business, banks or the SBA may require that you get a life insurance policy. This will allow the bank or the SBA to get paid back should you die. When you get a term sheet for your loan with the requirements to get approval, you might see that a life insurance policy equal to the amount of the loan is required before you can close on the loan.

What Type of Life Insurance Policy Should You Get?

 
Since most bank loans, or SBA loans are typically for terms less than 10 years, you should consider getting a 10 year term policy for the amount of the loan. A 10 year policy will be the cheapest option, and since the funds will be used to pay the bank and not your family, you should look for a short term policy, and shop for the best rates as well.

How Do You Set Up This Policy?

 
When you get an SBA life insurance policy that is specifically for a bank loan, you don’t name the bank as beneficiary. You wouldn’t want to do that since you may pay off the loan, die a month later, and the bank would then collect your death benefit. Instead you would name a loved one as a beneficiary. The way the bank is protected is that once the loan is approved, and your life insurance policy is issued, you fill out a collateral assignment form. This form, signed by you and the bank is given to the life insurance company and lets the insurance company know that your policy is part of a collateral for a bank loan. This also protects you since the insurance carrier will only pay the balance of the loan should you die, and not your entire death benefit. As time goes on and you pay off more of the loan, more of the death benefit belongs to your family.
When looking for a life insurance policy to use as collateral for a bank or Small Business Administration loan, make sure you work with an independent insurance agency that can shop the best rates for life insurance for you. In addition if you have any pre-existing health conditions, we recommend that you work with an agency that specializes in high risk life insurance, and can match you with the right company and can help you get approved.
At ChooseTerm we work with over 30 different life insurance carriers, and also specialize in high risk life insurance. Fill out the form below or call us to get a customized life insurance quote.
Author: Liran Hirschkorn