Key-person life insurance

Definition

A policy on the buyer's life, assigned to the lender as collateral.

Why It Matters

Lenders ask for this on most single-owner acquisitions and the assignment is a closing condition rather than a suggestion, so an uninsurable buyer is a financing problem nobody plans for. Price it while you are still choosing a lender: a health condition that adds weeks to underwriting costs far less to find before the exclusivity clock is running.

In numbers: A $1.2M acquisition loan is usually matched by $1.2M of coverage, which on a 10-year term policy for a healthy buyer in their thirties runs roughly $40 to $60 a month.