{"id":6154,"date":"2026-10-27T05:08:47","date_gmt":"2026-10-27T05:08:47","guid":{"rendered":"https:\/\/nrcpas.com\/life-insurance-guides\/key-person-insurance\/key-person-insurance-lender-requirement\/"},"modified":"2026-10-29T23:26:22","modified_gmt":"2026-10-29T23:26:22","slug":"key-person-insurance-lender-requirement","status":"publish","type":"page","link":"https:\/\/nrcpas.com\/life-insurance-guides\/key-person-insurance\/key-person-insurance-lender-requirement\/","title":{"rendered":"Bank Requires Key Person Life Insurance? What to Know"},"content":{"rendered":"\n
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Key Person Insurance<\/a> | Florida<\/p>

Your Bank Wants Key Person Life Insurance? Here Is What to Know<\/h1>

NR CPAs & Business Advisors helps business owners in Miami, Fort Lauderdale, Tampa, Orlando and across Florida understand key person coverage, lender requirements and how the policy fits the business's cash flow and taxes. Insurance is offered through Nischay Rawal, a licensed insurance agent, separately from the firm's accounting practice.<\/p>

Call us today to schedule a coverage review<\/a><\/div>
Call us today to schedule a coverage review<\/a><\/div><\/div>\n<\/div><\/div>\n\n\n

By Nischay Rawal \u00b7 Published October 27, 2026<\/p>\n\n

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What Key Person Life Insurance Is and Who It Is For<\/h2>\n

Key person life insurance is a life policy that a business owns on the life of someone whose loss would hurt the company’s finances. It is also called key employee life insurance. The business pays the premiums and is named as beneficiary.<\/p>\n

Key persons are usually owners, senior managers, or people whose skills or client relationships the company depends on. Florida law allows a business to obtain this coverage on owners, directors, officers, partners, and managers of the business or of its affiliates or subsidiaries, and on key employees or key persons, if consent is obtained in writing before the insurance is purchased. The key employee or key person must consent in writing before the policy is bought, and the business may not retaliate if that person says no (Fla. Stat. \u00a7 627.404<\/a>).<\/p>\n

This page is for business owners in Miami, Fort Lauderdale, West Palm Beach, Orlando, Tampa, and Jacksonville. It is also for Indian-American business owners who have received the same lender request. Nischay Rawal is a licensed insurance agent and the responsible agent for this page. Insurance is offered by the licensed agent, separately from the accounting practice of NR CPAs & Business Advisors.<\/p>\n\n

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Not sure what your next step is?<\/h3>

Talk it through with our team — we can walk you through how a situation like yours is usually handled and what your options are.<\/p>

Schedule a coverage review<\/a><\/div>
Schedule a coverage review<\/a><\/div><\/div>\n<\/div>\n

Why Banks Ask for Key Person Coverage<\/h2>\n

A bank may require key person life insurance when repayment seems tied to one person’s continued work in the business. Lenders look at who runs the company, who holds key client relationships, and what would happen if that person died.<\/p>\n

The requirement usually sits in the loan documents as a key person covenant. The covenant may require the business to keep coverage on the named person while the loan is open.<\/p>\n

The bank sets the loan terms, the coverage amount it wants, and the conditions. The insurer sets the policy terms and underwriting. Read the loan documents closely so you know which rules come from which party.<\/p>\n

How a Collateral Assignment Works<\/h2>\n

A collateral assignment is a way to give the lender a claim on the policy as backup for the loan. The policy owner signs over certain rights in the policy to the lender. The exact rights come from the loan documents and the insurer’s forms.<\/p>\n

An assignment does not turn the policy into a loan product. It does not set the interest rate or the repayment schedule. Those terms come from the lender.<\/p>\n

Personal guarantees and covenant wording live in the loan documents, not in the insurance policy. How any proceeds above the loan balance are handled depends on the assignment wording and the beneficiary designation.<\/p>\n

What the Lender Typically Needs to See<\/h2>\n

Lenders usually want proof that the policy exists, who owns it, who the beneficiary is, and that premiums are current. Your lender’s document list controls what you must submit. Most files include:<\/p>\n