Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
Yes. When you apply for life insurance, you will need to include a completed collateral assignment form - the rest of the application would be completed as normal.
I hope the information is helpful - please feel free to contact me for assistance with your insurance coverage and if you have any other questions. Thanks very much.
Yes, term life insurance can be used as collateral for some loans. Most commonly, we see people using term life insurance as collateral for loans through the SBA (Small Business Administration). When the loan is expected to be paid off within 10 years, using a term life insurance policy is a very inexpensive way of providing collateral. Our office generally uses nonmed insurance for this type of need, so that it can be put into effect quickly.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Collateral is an asset that you own that has value and the lender is accepting in order to provide you a loan. Term life insurance hasn’t any value. A collateral assignment is an additional item to induce a lender to make a loan and term life insurance can be used in this case. The term policy is assigned to the lender who has the first right over the proceeds in the event of death. This way the lender will get his money whether the assets that collateralized the loans are adequate or not. Incidentally, permanent insurance can be used as collateral because it has value.
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I hope the information is helpful - please feel free to contact me for assistance with your insurance coverage and if you have any other questions. Thanks very much.