A. Yes, both Term and Permanent life policies can be used as collateral.
Assume you need a 20-year $150,000 business loan, and you need proof of collateral to pay the loan balance should you die.
You go ahead purchasing a 20-year Term life policy with a $500,000 death benefit. In this way, the premium is within your budget, and you have a term life policy that can be used to provide more than enough for the required collateral.
You then work with your insurance company and sign a release form with the lender as the assignee. If you die before the loan is paid in full, the death benefit will be used to pay the balance of the loan. You should still name a beneficiary because any remaining death benefit balance will be payable to the beneficiary. If you don't die and pay the loan balance before the 20-year period, the collateral assignee should release the assignment.