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Collateral InsuranceCollateral Insurance

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What is it?

It is life insurance on a shareholder, or key individual assigned to a financial institution.

Insurance is required by the financial institution as security on a line of credit,or other operating loan, for the businessof the shareholder/key individual.

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Why have it?

In a vast majority of cases, financial institutions require it.

Even in situations where it may not be required, there are valid reasons for considering insurance of this nature

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Why have it...If the bank doesn’t want it?

It will ensure that the company’s credit will not be impaired or lost.

It will ensure that the estate of a deceased shareholder/key person is relieved of corporate indebtedness when there is a personal guarantee in effect.

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Are the premiums deductible?

IF IF the policy is assignedIF IF it is required at the time the loan is taken outIF IF the lender is a corporation in the “lending business”IF IF the interest on the money borrowed is deductible from incomeThen part or all of the premiums are deductible.Then part or all of the premiums are deductible.

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Who offers it?

• Some banks have arrangements with various insurers

• Individuals can apply for personal insurance and assign it

• Existing insurance can be assigned

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Our Recommendation:

Purchase personal insurance!Purchase personal insurance!• It is under the control of the policy

owner.• It is less expensive than bank coverage• Once the debt has been retired, coverage may be

used for other purposes• Coverage is portable

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Questions?