Building your business? You might need outside funding to reach your goals. There’s no doubt that applying for a loan comes with a lengthy to-do list.
If you’re applying for a Small Business Administration (SBA) loan and plan to stay involved in the day-to-day operations of the company, that could include buying a life insurance policy.
A life insurance policy is required when the business is “tied to an individual or individuals,” under SBA SOP 50 10 5 (B). If you’re an entrepreneur looking to take out an SBA loan to make your business goals a reality, life insurance is a must. The success of the business rests on you, so lenders want to make sure they have collateral in case something happens to you.
Your life insurance policy is there to protect your lender and lower their risk. As such, there are a few guidelines you’ll need to follow when you’re shopping around for a policy:
There are two paths you can go down. You can apply for a traditionally underwritten policy, which can take anywhere from three to eight weeks to approve. As part of the process, you might need to do a phone interview or take a medical exam, which is a basic physical your insurer pays for.
If you’re racing against the clock to secure your loan, you can purchase a term life insurance policy online. There are a bunch of fintech companies that can issue policies instantly, including Bestow, Ethos, and Haven Life. They’re backed by strong parent companies, and you most likely won’t need to take a medical exam. The downside is you can’t customize your coverage with as many riders.
Either way, it’s important to compare life insurance companies and policies to find one that fits your family’s — and your business’ — needs and budget.
Katia Iervasi is a staff writer for the insurance team at finder.com. In addition to dozens of mortgage and personal finance pages, Katia has written more than 250 insurance articles that help readers understand the intricacies of policies across life, car, health and more.
Hailing from sunny Sydney, Australia — where she earned a Bachelor of Communication from Griffith University, majoring in journalism and public relations — Katia now calls New York City home. Her goal is to help you splash your cash smartly (and be a pro when the subject pops up at dinner parties).