Can Life Insurance Be Used As Collateral? 
Yes life insurance can be used as collateral and the way in which is used as collateral varies depending on intent . Some lenders require life insurance death benefit to back a loan balance , this is common for small business loans . In other cases , one can also pledge the cash surrender values in a life insurance policy as collateral to a loan . Many banks , thrifts , credit unions , and trust companies have written procedures on their requirements for pledging life insurance as collateral . Mostly that the company be an AM Best A or better rated carrier and that the loan to value ratio never exceed a certain percentage . 