General insurance Can Life Insurance Be Used As Collateral?

[kayode10]

Raising a business capital is one of the hardest ask anyone can face whenever they want to start a new business.

There are many ways in which people raise capital for their business idea they want to launch.

Those who are lucky get business capital from friends and family who are buoyant enough and believe in their dreams.

Another ways in which people raise capital for business is through angel investors. To be very honest angel investors are very hard to come by.

Another way is to raise business capital by taking loan from financial institutions like bank.

You know, bank will not give you any loan unless you have a reasonable collateral equivalent or greater than the loan you are applying for.

So I want to ask that can someone use life insurance as a collateral to obtain loan from financial institutions?

 

[btaliat]

One of the benefit of insurance is that it can be used as a collateral. There is probability that one can use whole life term insurance as a collateral in bank while securing loans. This will mean that failure to pay the loan will mean forfeiture of all the compensation.

 

[Wisdom01]

Yeah you can use your insure certificate as collateral ,but make sure it's worth it before making use of it as collateral for loan collection , because if it's not worth it the bank would reject the collateral and won't give the loan too , these are the things to consider too

 

[kayode10]

@btaliat thanks for the great submission I have been thinking about this for a long period of time. I don't think bank will accept life insurance as collateral if that person just starting out the insurance package. I will go out today to make some enquiries at some of the insurance company closer to my workplace.

 

[Jamoflondon]

I am not sure though, but why use your insurance as a collateral when you can use the insured as a collateral, this is what I mean, let’s say you insure your property, why don’t you use that property as a collateral instead of using the insurance you did on it, because I am sure that the insurance you bought can never be worth more than what you insured

 

[kayode10]

@Jamoflondon you are speaking from the angle in which the person involved in different insurance packages. I am asking the question in case the person did only life insurance and need to raise capital for the business or a contract. I think I will have to go to bank to make enquiry more about it.

 

[btaliat]

@btaliat thanks for the great submission I have been thinking about this for a long period of time. I don't think bank will accept life insurance as collateral if that person just starting out the insurance package. I will go out today to make some enquiries at some of the insurance company closer to my workplace.

Bank cannot accept premium on newly started life assurance because if the person eventually dies ,the premium may not even be enough to stand as a collateral. But if the person has started for a while, banks may still consider it SD a source of collateral. Anyway, I will be glad if you can share the outcome of your inquiry.

 

[Lens1000]

I am aware that the insurance policy can be used as collateral to obtain loan from the bank . This is the more reason why life insurance is a necessity. If your business needs capital for growth, you could approach the insurance company for policy termination. If your submission is granted you will be paid the accumulated fund in your policy.

 

[btaliat]

I am aware that the insurance policy can be used as collateral to obtain loan from the bank . This is the more reason why life insurance is a necessity. If your business needs capital for growth, you could approach the insurance company for policy termination. If your submission is granted you will be paid the accumulated fund in your policy.

Thanks for the extensive explanation on this. Though almost everybody has agreed to the fact that insurance especially life assurance can serve as collateral, the bone of contention is that ,who will be eligible to be granted collateral using life assurance? Can a new insured person be granted such an offer based on the fact that if he dies, his premium wont be enough.

 

[Mandy96]

I don’t think it is possible to use an insurance policy as a collateral, although I am not sure because I am really not into it. But I think it takes a lot of process to conclude on an insurance contract. Now let’s think how much stress it would take to combine the process of a bank loan linked with the insurance company