The life blood of our economy flows through the entrepreneurs all across America. Through our government, new growth has been made even more feasible by all because of access to capital through the 7(a) loan program, where owners are granted loans to start or grow their small businesses.
For anyone who is going through, or has gone through, this process, you may have come across the requirement to collateralize the loan with life insurance.
This is to protect the lending institution, or the payee, should something happen to you, the payor, while the loan is being repaid.
But as the business owner, we know you don’t want to pay an arm and a leg for premiums, because that money could be better spent on the business to bring in new revenue. Stick with us and we’ll show you how to get the best rates on life insurance for SBA loans. Should you be interested in decreasing term life insurance or term life insurance with no exam, you have those options as well.
Life Insurance For SBA Loans
You have several options of choosing the right maximum life insurance policy to satisfy your loan requirements. But in order to pay the smallest premium, there are lots of little tips we can give you to trim the fat. Here are a few:
- Match the loan duration
- Look for price breaks
- Price shop your rates
While those may seem obvious to some, you may be surprised how quickly someone gets caught up in the buying process and doesn’t even realize they’re paying more than they really need to be.
Match The Loan Duration
For those who aren’t aware, the longer duration of insurance you lock in, the higher rates you’ll be paying. To make that clear, the longer you choose to lock in your rates for, the more you’ll pay each month.
Each business will require different loan amounts and terms, so customize your policy to your own rather than taking what seems to be a default policy. If you have a $100,000 loan and you will be paying it back over 10 years, you only need a $100,00o 10-year term. There’s no need to make it more complex than it is.
With life insurance, there are many different options to choose from, starting with an annual renewable term which is only locked in for one year, all the way up to policies which last a lifetime.
Look For Price Breaks
Typical price breaks occur at $50,000, $100,000, $250,000, $500,000 and $1M in coverage.
So, if you need $225,000 in coverage, it might actually be cheaper to go up to the next price band at $250,000. You can get whatever amount you want, but why not pay less and get more in coverage? Besides, the extra coverage could be set up to pay to your own beneficiaries rather than the lender.
There are other price breaks when looking at different durations, too. Believe it or not, there is much more competition from insurance carriers at a 10-year term level than at 5-year, so you may also consider getting quotes for both to see which might yield a lower price.
Price Shop Your Rates
There are plenty of ways to compare different policies, so a word of caution from the beginning: compare apples to apples.
There are hundreds of life insurance carriers to choose from, and they all have pretty much the same thing. Where they differ is how they award different risk classes, but also in their base premium. When one company might offer a Preferred risk class, another may only offer a Standard Plus rate. These small differences can add up to big premium jumps.
We look at rates from over 70 carriers at once, making sure to only use the top rated companies in the country with the highest reputation.
Every insurance company is going to have different medical underwriting and rating systems that they are going to use, which means that you will get drastically different rates depending on which company that you get the quote from.
Getting Affordable Life Insurance Coverage
Regardless of how much insurance that you need or how long you need to have the coverage, there are several ways that you can get lower insurance premiums. It’s important that you get quality life insurance at the most affordable price. Making a few simple lifestyle changes can save you thousands of dollars on your insurance coverage every year.
The first thing that you should do when you are shopping for insurance coverage is to quit smoking. Being a smoker is one of the worst things that you can do for your health and your wallet. If you’re a smoker, you can expect to pay much higher premiums. In fact, smokers are going to pay at least twice as much for their insurance coverage versus what a non-smoker is going to pay for the same sized policy. With some companies, a smoker will pay as much as three times as much.
The next thing that you should do is improve your health. Before the insurance company approves your application, they are going to require that you take a medical exam. The results of the exam are going to play a huge role in how much you pay every month for your coverage. If you want to save money, you’ll need to get better results from the tests. The two best ways that you can do that are to make healthier food options and to go to the gym. Diet and exercise are both going to help you lose weight, lower your blood pressure, and reduce your chances of being diagnosed with health complications.
Another way that you can save money is by slowing down on your way to work. When you apply for insurance coverage, the company is going to pull your driving records. If you have any speeding tickets or accidents on your records, then you’re going to be considered a high-risk applicant. The insurance company is going to offset that additional risk by charging you higher premiums every month. If you want to save money, you’ll need to lay off the gas pedal on your way to work every morning.
Other Things To Consider
Life insurance approvals and ratings are based on age and health. We recommend the younger you can look into purchasing life insurance coverage the better. Obtaining life insurance coverage at 30 will be much easier that looking for life insurance coverage at 80! Your health is also a factor that can get worse with age, not only severe health issues but things such as weight and BMI affecting your life insurance rates are topics you will have to face as well at an older age. So get started today!
This means not all carriers may accept you depending on your past and current health. If this is the case, we can get someone up to $1,000,000 in coverage no matter what their health history is, although it may be slightly more expensive per thousand than someone who can get traditional coverage.
Another thing to think about is your time frame. While some folks start the process quickly, others procrastinate. If you find you need coverage in place quickly, we can help you get covered without ever taking a medical exam, saving you weeks of waiting, hassles of scheduling and taking the physical, and wondering if you’ll find something you didn’t know about in your blood profile which might hinder your chances at the top tier rates.
Not only will we help you through the process of buying, we’re familiar with the process of collateral assignment, and we do it at no extra cost to you. If you need life insurance for an SBA loan, we can help from beginning to end.
We know that securing a life insurance policy to meet a loan requirement can be a difficult and frustrating process. There are dozens of different things that you’ll need to account for, and we are here to make it as quick as simple as possible. Not only should you ensure that you have the insurance to satisfy the loan, but you should always guarantee that your family has the protection that they need, regardless of what happens to you.
Unlike a traditional insurance agent, our agents are a group of independent brokers, which means that we don’t work with one single company. Instead, we work with dozens of different companies across the nation, which means we can bring all of the best plans and premiums directly to you. Working with our agents can save you both time and money.