So you need life insurance for an SBA loan. That’s no problem, but how do you get the best rate and coverage to fit your specific need?
How you do know you’re getting the best rate and coverage available?
There’s close to 1,000 life insurance companies that offer insurance in the United States, but only about 121 of these will offer the best rates and products for the general population.
The number of insurance companies gets smaller if you’re only looking for a term insurance policy to cover an SBA loan.
If you don’t care about getting the best rate and/or value, then you could call a local broker in your town or just buy from the first website that shows up when you google “need life insurance for an SBA loan.”
The Problem With Buying Any Policy To Cover SBA Loans
If you deal with the wrong agent, broker, or insurance company, it could take months for you to receive your policy.
You may also only qualify for a significantly higher rate than you’re expecting, since you have to remember that ANY agent can quote you ANY rate whether it’s accurate or not.
If you have health issues like heart problems, diabetes, or if you may be overweight, this can make qualifying even tougher.
Thousands of people are misquoted on their life insurance each month, so you want to make sure you don’t get stuck paying much more than you have to for life insurance.
There is an easy fix if you qualify for a higher rate than you’re expecting and your agent is not willing to shop to get you a better offer, or if they lie to you and tell you that all insurance companies will make you a similar offer.
Find out before you apply to any company if your agent will make sure that your policy is assigned to the lender in a decent time frame after you’re approved or if it is strictly up to you to make sure your policy is assigned to lender.
Dealing directly with any life insurance company can be a major hassle, going into voicemail system, getting re-routed from department to department, getting incompetent or “first day on the job” employees. There are very few insurance companies with excellent or even good customer service nowadays. A good agent or broker will handle these issues for you, so you don’t have to deal directly with the insurance company.
How To Get the Best Insurance Policy To Cover SBA Loans
The best way to describe this is to use an example of case we did for a 58 year old gentleman who needed $500,000 of 20 year term for his SBA loan.
During the first five minutes of contact with this gentleman, he answered health/avocation questions. We had a laugh that his overall health was excellent according to him, even though he eats donuts and drinks soda every day.
I sent him an email with the top insurance companies available to him for $500,000 of 20 year term based on my database search of rates from 121 different insurance companies. In my opinion, the lowest rate is not always the best value, so I showed him products from several different insurance companies with monthly cost as follows:
$181- $211- Cincinnati Life (Lowest Cost)
$198- $223- Columbus Life (Lowest Cost with best Critical & Chronic Illness Living Benefits)
$212- $251- Principal Life (Lowest Cost No Exam)
(Due to ongoing price war between term life companies, rates right now are lower than the above.)
I usually show the two most probable best rate classifications for each company, since there is no way to know the exact rate class for which anyone will qualify until they go through underwriting. Plus, the fact that this guy told me he eats donuts and drinks soda every day made me nervous about only quoting best rates.
This gentleman opted to apply for the lowest rate from Cincinnati Life, and we got his approval at best rate class of $181 per month within 14 days of submitting his application.
This was a quicker approval than most fully underwritten (i.e. that require insurance exam) products take, which is why I gave him the option of the “no exam” product up front. Getting the best rate was the most important factor for this client, so he was okay with having an exam.
This gentleman was happy with the outcome and the fact that he got the lowest rate in the country for his life insurance. I told him to keeping eating those donuts and drinking that soda, as it seems to be working for him!
After he paid for his policy, I provided him with the assignment form per his request. The lender wanted to deal directly with the insurance company regarding the assignment, even though we offered to handle it. I provided contact information to his lender, and the lender did the rest.
What If I Have Health Problems and Need Life Insurance for an SBA Loan?
If you need life insurance to cover an SBA loan and have health problems, the process is basically the same as for people with no health problems.
There will be more work for the agent/broker you deal with in trying to narrow down best rates and insurance companies for you if you have health or other underwriting issues (i.e. private piloting, scuba diving, etc), so you’ll really need to ask more questions of the agent/broker you’re going to deal with up front before you commit to applying.
Ask the agent things like:
- “How many (fill in your health or other issue) cases do you do each year?”
- “Do you think I’ll have a shot at qualifying for a Standard rate?”
- “What is the likely best case table rating I can expect to get?”
- “How many different insurance companies can you offer me?”
- “What happens if I’m declined or I only qualify for a higher rate than you quote me? Do you have a system to find me better offers?”
What you don’t want to have happen is getting suckered into applying from that smooth talking agent who has no clue how to quote people with your particular issue and/or applying to the agent who has no system or way of placing you with a different insurance company if the first doesn’t work out.
A Solution for Even the Toughest Life Insurance Cases
A perfect example of a tough SBA loan case I shopped recently was for a 67 year old male with Granulomatosis with polyangiitis, also known as GPA Wegener’s disease, an autoimmune disorder.
This gentleman just started taking prednisone and rituximab infusion a month before contacting me so I knew most companies would decline him as the norm is you must be off medication and symptom free from the GPA Wegener’s before most insurance companies may consider making offer.
This gentleman was told he had to have $250,000 of 10 year term for his loan. We shopped with every life insurance company to find him offer and the best case offer was going to be $798 per month.
That is a lot of money to pay for a 10 year term, so I also quoted him a no exam product for which he could easily qualify. A $150,000 term would cost $603 per month, or $100,000 would cost $404 per month.
He inquired with a lender to see if any lower amount of insurance would suffice, and they ultimately allowed him to use another form of collateral for his loan.
IMPORTANT: If you have more serious health issues and are told that you must have life insurance to secure your SBA loan, first try to get the lender to accept any other form of collateral for loan repayment in the event of your death. Don’t pay for life insurance if you don’t have to.
If you are still required to have life insurance for your loan, make sure you find an agent or broker that is highly experienced in shopping tough life insurance cases.
Bottom Life On Getting Life Insurance for Any Loan
After you verify that the life insurance is absolutely required, remember that applying to the wrong company or through wrong agent/broker could cost you thousands and thousands of dollars over the life of your policy, or you may end up not qualifying at all.
Having to to start the process all over again with new agent or broker would be an extreme waste of time!
If you need information on obtaining an SBA Loan or you have loan related questions, you can visit the SBA loan program website.
If you’d like to check out best rates available to you, complete the information in the “Instant Life Insurance Quotes” module to the right.
If you’d like help in finding the best life insurance rate, please feel free to call us at 1-800-380-3533 or just click here to email us.
Since 1992, Gordon E. Conwell, III (G3) has helped thousands of ”higher risk” individuals get the best life insurance rate/value. Being a high risk himself, he knows the struggles you’ll face trying to get affordable life insurance. His unique shopping process and underwriting knowledge will result in the best offers, every time!