I made this video to provide tips for anyone seeking to get an 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
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.
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.
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.
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