The practice that your customer proposes is uncommon and may be too risky for your institution to take on. The banking agencies discussed a similar practice in the Interagency Statement on the Purchase and Risk Management of Life Insurance, which states that loans with terms which allow a borrower to make no payments and which repay the bank only after the policy matures upon the customer’s death are “generally speculative and an unsafe and unsound banking practice.” FIL 127-2004, Appendix, Life Insurance as Security for Loans. One of our associate members, a bank-owned life insurance consultant, confirmed that this is not a common practice and may carry many risks.