According to a recent article penned by a New York Life securities partner, Life insurance may be a player in the credit game.

When banks evaluate a loan application from a business client, they frequently take into consideration whether a key employee in that business has life insurance. In the event that the employee’s loss causes a business disruption, the life insurance could serve as a means of secondary collateral. In a sole proprietorship or other closely held business, a life insurance policy can possibly be a deciding factor to the bank as to whether or not to grant the loan. The chances for obtaining a loan approval may be enhanced if the business itself is named as the policy beneficiary.

A life insurance policy can help in the following ways:

It may make a lender more willing to grant credit or a loan.
It may open access to higher amounts of credit.
In some instances, it may result in a more competitive loan rate.

Term Life Insurance is often used, especially when:

Protection needs are short-term or limited, such as to cover a single loan for a specific period of time.
The situation calls for a high dollar amount of coverage.
Dollars are tight. Term insurance provides coverage for a lower immediate premium dollar than does permanent insurance.
Most businessowners prefer no-frills protection. You can buy it when you need it and drop it when you’re done.

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