I loaned money to a friend and he signed a promissory note while he
makes payments.  He currently has a term life insurance policy and I
am listed as a beneficiary.

Do insurance companies notify beneficiaries if the policy elapses? 
Can I apply for a term life insurance policy on the borrower? 
What else can I do to protect my interest if he were to pass away?

How much does he owe you?

Please be sure to give him receipts signed by you for each payment he makes.

Insurance company is not responsible for notifying potential
beneficiaries if a policy lapses.

If he were to die, you would file a claim with the executor of his
estate for payment of the outstanding amount.

You probably can purchase a term life insurance policy on the
borrower, but you would need to discuss this with a life insurance
agent.

SINCERELY:
4KEITH (I'm NOT a GOOGLE Researcher)

Thanks 4KEITH,

He owes $20,000 and I'm trying to do whatever needs to be done to
protect my interest.

Thanks again, Erik