Sunday, September 28, 2008

Life Insurance as Loan Collateral

Loans are crucial to the expansion and growth of small businesses. Whether your business is acquiring funds from a local bank or a private lender, many of these institutions will require life insurance on the business owner(s) as security for the loan.

In most cases, inexpensive term life insurance policies that offer guaranteed level rates for the duration of the loan can be purchased to satisfy this requirement. When buying life insurance to secure a loan, the company pays the premiums, owns the policy and is the named beneficiary.

As soon as the key man insurance policy is effective, a collateral assignment agreement can be signed by the business owner and the bank. The collateral assignment is a lien against the policy proceeds. In the event of the business owner’s death, the bank would have first rights to the policy proceeds in the amount of any outstanding loan balance due. The business would then receive any remaining proceeds.


BiancaTorres said...

Term Life Insurance Rates can be very costly for the employee. I have friends who pay a large premium for theirs through their jobs. My company has a great plan and it's pretty cheap compared to others I've checked.

Adam said...

As affordable term life insurance policies are for a specific time period it is also cheaper when compared to the full life insurance policy. You can purchase a policy which is offered between 10 year term life insurance plan to 30 years’ plan.

BHH said...

Where can I get a loan secured by life insurance? Can someone help me?

Tee Chess said...

An affordable policy is difficult to obtain but is not impossible. The best place to look for an insurance policy is online because with this way one can save both time and money.
corporate insurance

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