A life insurance policy can be assigned when the rights of one person are transferred to another. Your insurance policy rights may be transferred to another person for a number of reasons. The process is known as assignment. A “transferor” (policyholder) is the person who assigns the insurance policy.
Collateral transfer of life insurance is a method of providing security to a lender when you apply for a loan. In this case, the guarantee is the nominal value of your life insurance policy, which could be used to pay the amount you owe if you die while in debt. The collateral allocation of life insurance is a common requirement for commercial loans, and lenders may require you to obtain a life insurance policy to use as collateral. Withdrawals of the cash value of a life insurance policy may result in taxes owed and could reduce your death benefit.
This information is not an insurance policy, does not refer to any specific insurance policy, and does not modify any provision, limitation or exclusion expressly set forth in any insurance policy. Find out if your lender will accept the collateral assignment of an existing permanent or temporary life insurance policy. He has contributed a copy for the Canadian Insurance Journal and co-authored the text of the marketing guides for life insurance companies. PAA and Progressive are not responsible for the choices of insurers or coverages, the policies issued, the claims, the content or operation of others' websites, or the way others handle or use your information.
An alternative is to assign the life insurance policy to a lender in exchange for a line of credit or regular loan payments. Once you have paid your first life insurance premium, you can proceed to complete a guarantee allowance form through your insurer. FEGLI members use this form to assign ownership of their life insurance coverage to another person, company, or trust; and assignees use the form to reassign coverage. If you have a life insurance policy with cash values, you may want to access those cash securities to increase your income stream.
With a conditional assignment, even if you transfer the ownership rights of your life insurance policy to another party, the assignment stipulates that if a specific event occurs, the assignment may be suspended or revoked in whole or in part. Once your bank confirms that it is the transferee of the guarantee for your life insurance policy, you can proceed with your loan application. While the basic element of a life insurance policy is financial security protection in the event of an untimely death, the variety of products available on the market gives you many financial planning options. The assignment of life insurance is a document that allows you to transfer the ownership rights of your policy to a third party, transferring to that third party all the property rights in your policy, including the rights to make decisions about coverage, the beneficiary and investment options.
Since the policy is assigned to the bank, if you don't pay the policy premiums, the bank will cancel the loan, cancel the insurance policy, and use the cash value as payment on the loan.