In a collateral assignment, who typically retains ownership of the policy?

In a collateral assignment, who typically retains ownership of the policy?

• A. The lender becomes owner.
• B. The original policy owner retains ownership; the rights are pledged as security.
• C. The insurer becomes owner.
• D. Ownership transfers permanently to the beneficiary.

Answer: (B)

Collateral assignment keeps ownership with the policy owner while giving the lender a security interest in the policy. The borrower remains the policy owner, and the lender receives a collateral assignment—essentially a lien on the policy’s rights to the death benefit and cash value up to the loan amount. This lets the loan be secured by the policy, with the lender able to claim proceeds to satisfy the debt if needed, but ownership of the policy itself does not transfer. The insurer remains the issuer, and ownership isn’t permanently transferred to the lender or the beneficiary. The security is typically released once the loan is repaid.

Collateral assignment keeps ownership with the policy owner while giving the lender a security interest in the policy. The borrower remains the policy owner, and the lender receives a collateral assignment—essentially a lien on the policy’s rights to the death benefit and cash value up to the loan amount. This lets the loan be secured by the policy, with the lender able to claim proceeds to satisfy the debt if needed, but ownership of the policy itself does not transfer. The insurer remains the issuer, and ownership isn’t permanently transferred to the lender or the beneficiary. The security is typically released once the loan is repaid.