Start with the lender’s written amount
Ask for the required insured person, amount and term in writing. For certain undersecured transactions, the starting point may be the difference between the applicable loan amount and collateral value accepted by the lender.
Why the calculation is transaction-specific
Purchase price, appraised value and collateral value are not interchangeable. Lien priorities, discounted values and assets actually pledged can affect the lender’s analysis. For an SBA 504 loan, the relevant SBA-backed amount is also distinct from total project cost.
Separate loan protection from family protection
A policy pledged to a lender may leave less for family beneficiaries if a covered debt is outstanding. Consider whether you need separate protection for your family, business partners or key employees.
See the complete SBA life insurance requirements guide for program-specific context.