Term Life Insurance as Collateral for Loans
People who need a loan for their businesses, for example, have the option of placing an asset as collateral for the loan. One of those assets can be a life insurance policy. The life insurance policy, either term or whole life, can be used as collateral for a loan and will ensure that the lender is paid in the event that the borrower passes away. If the borrower survives and the loan is paid off, the life insurance policy returns to the borrower.
The Borrower Does Not Have To Have A Current Life Insurance Policy
A borrower who currently has a life insurance policy can give that particular policy as collateral for a loan, but a policy does not have to be in place at the time the borrower seeks a loan. If borrower does not have a policy, one can be purchased with the input of the lender. The lender and the borrower both agree to terms such as who will make the payments on the policy.
Those Without Insurance Can Seek Life Insurance Online
After a borrower has negotiated with a lender as to the terms they will be looking for in a life insurance policy, the borrower can do a search for life insurance online. The simplest way to purchase a life insurance policy is to seek life insurance online, because people can solicit several quotes for many different insurance companies in order to find the most coverage for the best price.
The Need For The Collateral Assignment Form
The next step is to complete the Collateral Assignment Form. The Collateral Assignment Form comes from the insurance company or the lenders may want to use their own. Either way, this form sets up the life insurance policy as collateral for a loan; the lender will be named as the beneficiary of the life insurance policy in the amount of the loan if the borrower passes away or the policy matures.
How The Agreement Is Completed
It will be important that the lender and the insurance company both retain a copy of the Collateral Assignment Form. After both of these parties have received this document, they will keep it throughout the duration of the agreement. After the loan amount has been paid to the lender out of the policy’s proceeds, whatever is left over will be given to any other named beneficiaries.
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