There is no one-size-fits-all amount
Life insurance requirements can reflect ownership, key-person exposure, collateral, repayment considerations and lender policy. Your lender determines the documentation that satisfies its requirements, so it is important not to rely on general rules of thumb.
Questions to ask your lending team
- Who needs to be insured?
- What face amount and policy type are acceptable?
- What term or duration is required?
- Is collateral assignment required, and what exact assignee name should be used?
- What evidence of coverage is needed before closing?
Prepare early for underwriting
Insurance underwriting is separate from the loan approval process. Carrier review may involve health, lifestyle, financial and other information. Starting promptly after the requirement is known can provide more options than waiting until the final closing window.
Keep the team aligned
With authorization, insurance coordination can include the borrower, carrier and lender so that the policy and related documentation are reviewed against the lender’s stated request.