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Collateral assignment of life insurance
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Secured loans are often used by individuals needing financial resources for any reason, whether it’s to fund a business, remodel a home or pay medical bills. One asset that may be used for a secured loan is life insurance. Although there are pros and cons to this type of financial transaction, it can be an excellent way to access needed funding. Bankrate’s insurance editorial team discusses what a collateral assignment of life insurance is and when it might—or might not—be the best loan option for you.
What is collateral assignment of life insurance?
A collateral assignment of life insurance is a method of securing a loan by using a life insurance policy as collateral . If you pass away before the loan is repaid, the lender can collect the outstanding loan balance from the death benefit of your life insurance policy . Any remaining funds from the death benefit would then be disbursed to the policy’s designated beneficiary(ies).
Why use life insurance as collateral?
Collateral assignment of life insurance may be a useful option if you want to access funds without placing any of your assets, such as a car or house, at risk. If you already have a life insurance policy, it can be a simple process to assign it as collateral. You may even be able to use your policy as collateral for more than one loan, which is called cross-collateralization, if there is enough value in the policy.
Collateral assignment may also be a credible choice if your credit rating is not high, which can make it difficult to find attractive loan terms. Since your lender can rely on your policy’s death benefit to pay off the loan if necessary, they are more likely to give you favorable terms despite a low credit score.
Pros and cons of using life insurance as collateral
If you are considering collateral assignment, here are some pros and cons of this type of financial arrangement.
- It may be an affordable option, especially if your life insurance premiums are less than your payments would be for an unsecured loan with a higher interest rate.
- You will not need to place personal property, such as your home, as collateral, which you would need to do if you take out a secured loan. Instead, if you pass away before the loan is repaid, lenders will be paid from the policy’s death benefit. Any remaining payout goes to your named beneficiaries.
- You may find lenders who are eager to work with you since life insurance is generally considered a good choice for collateral.
- The amount that your beneficiaries would have received will be reduced if you pass away before the loan is paid off since the lender has first rights to death benefits.
- You may not be able to successfully purchase life insurance if you are older or in poor health.
- If you are using a permanent form of life insurance as collateral, there may be an impact on your ability to use the policy's cash value during the life of the loan. If the loan balance and interest payments exceed the cash value, it can erode the policy's value over time.
What types of life insurance can I use as collateral for a loan?
You may use either of the main types of life insurance— term and permanent —for collateral assignment. If you are using term life insurance, you will need a policy with a term length that is at least as long as the term of the loan. In other words, if you have 20 years to pay off the loan, the term insurance you need must have a term of at least 20 years.
Subcategories of permanent life insurance, such as whole life , universal life and variable life, may also be used. Depending on lender requirements, you may be able to use an existing policy or could purchase a new one for the loan. A permanent policy with cash value may be especially appealing to a lender, considering the added benefit of the cash reserves they could access if necessary.
How do I take out a loan using a collateral assignment of life insurance?
If you already have enough life insurance to use for collateral assignment, your next step is to find a lender who is willing to work with you. If you don’t yet have life insurance, or you don’t have enough, consider the amount of coverage you need and apply for a policy . You may need to undergo a medical exam and fill out an application .
Once your policy has been approved, ask your insurance company or agent for a collateral assignment form, which you will complete and submit with your loan application papers. The form names your lender as an assignee of the policy—meaning that they have a stake in its benefits for as long as the loan exists. You will also name beneficiaries or a single beneficiary, who will receive whatever is left over from the death benefits after the loan is repaid.
Note that you will need to stay current on your life insurance premium payments while the collateral assignment is active. This will be stated in the loan agreement, and failure to do so could have serious repercussions.
Alternatives to life insurance as collateral
If you are considering a collateral assignment of life insurance, there are a few alternative funding options that might be worth exploring. Since many factors determine each option, working with a financial advisor may be the best way to find the ideal solution for your situation.
Unsecured loan
Depending on your situation, an unsecured loan may be more affordable than a secured loan with life insurance as collateral. This is more likely to be the case if you have good enough credit to qualify for a low-interest rate without having to offer any type of collateral. There are many different types of unsecured loans, including credit cards and personal loans.
Secured loan
In addition to life insurance, there are other items you can use as collateral for a secured loan . Your home, a car or a boat, for example, could be used if you have enough equity in them. Typically, secured loans are easier to qualify for than unsecured, since they are not as risky for the lender, and you are likely to find a lower interest rate than you would with an unsecured loan. The flip side, of course, is that if you default on the loan, the lender can take the asset that you used to secure it and sell it to recoup their losses.
Life insurance loan
Some permanent life insurance policies accumulate cash value over time that you can use in different ways. If you have such a policy, you may be able to partially withdraw the cash value or take a loan against your cash value. However, there are implications to using the cash value in your life insurance policy, so be sure to discuss this solution with a life insurance agent or your financial advisor before making a decision.
Home equity line of credit (HELOC)
A home equity line of credit (HELOC) is a more flexible way to access funds than a standard secured loan. While HELOCs carry the downside of risking your home as collateral, you retain more control over the amount you borrow. Instead of receiving one lump sum, you will have access to a line of credit that you can withdraw from as needed. You will only have to pay interest on the actual amount borrowed.
Frequently asked questions
What is the best life insurance company, what type of loans are collateral assignments usually associated with, what are other common forms of collateral, what are the two types of life insurance assignments.
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What Is Collateral Assignment of Life Insurance?
Collateral assignment of life insurance designates a lender as the assignee of a policy, granting them the right to part or all of the death benefit until the loan is repaid.
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Nathan Paulus
Director of Content Marketing, MoneyGeek
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy. Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
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Casie McCoskey is a professional editor passionate about providing people with accessible information on personal finance. Before MoneyGeek, she worked in the legal field, drafting and editing briefs and motions.
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Updated: June 5, 2024
- How It Works
- Overview of Application Process
Pros and Cons
- Impact on Beneficiaries
- Alternatives
Related Content
Advertising & Editorial Disclosure
Collateral assignment of life insurance is an arrangement where a policyholder uses the face value of their life insurance policy, which can be a term or permanent life insurance policy, as collateral to secure a loan. If the policyholder dies before they pay off the loan, the lender is prioritized to receive a portion of the death benefit equivalent to the outstanding loan balance. The remaining benefit then goes to the policy's beneficiaries. This agreement ensures that life insurance collateral assignment acts as a safety net for both the lender and the beneficiaries.
- Collateral assignment involves using a life insurance policy as security for a loan, where the lender has a claim on the death benefit if the borrower defaults or passes away before repaying the loan.
- The lender receives priority over the death benefit, which means they are paid first from the policy's payout before any beneficiaries if the loan remains unpaid.
- Various life insurance policies, including term, whole and universal, can be used for collateral assignment, depending on the insurance company's policies and the policy's value.
- If a life insurance policy lapses or is canceled during a collateral assignment, it can breach the loan agreement, potentially resulting in immediate repayment demands.
How Collateral Assignment of Life Insurance Works
The collateral assignment allows you to use your life insurance policy as security for a loan. The process involves legally designating your policy as collateral, which means if you pass away before fully repaying the loan, the lender can claim the death benefit to cover the remaining balance. You start by choosing either a term policy or whole life insurance and then complete a collateral assignment agreement. This agreement is legally binding and sets the terms for the lender to access the death benefit .
For your beneficiaries, the assignment of your life insurance policy as collateral could reduce the death benefit they receive. If you die with an outstanding loan balance, the lender is paid first from the policy's proceeds. Any remaining amount goes to your beneficiaries only after the loan is settled.
For example, a policyholder with a $500,000 policy uses their life insurance as collateral for a $200,000 loan. If the policyholder dies before settling the loan, the lender will receive $200,000 from the policy's death benefit. Meanwhile, the remaining $300,000 gets disbursed to the policy's beneficiaries.
Roles of the Policyholder, Lender and Insurance Provider
Role of the Policyholder
- Ensure consistent premium payments to keep the policy active and in force.
- Inform the lender of any policy changes, such as lapses or surrenders.
- Understand that active management upholds the collateral agreement's integrity.
Role of the Lender
- Accept the life insurance policy as collateral.
- Right to recover owed amounts from the policy's death benefit if the policyholder dies before loan repayment.
- Priority claim on the death benefit, with remaining funds disbursed to beneficiaries.
- Responsible for releasing the assignment after full loan repayment.
Role of the Insurance Provider
- Approve or reject the collateral assignment of the policy.
- Evaluate and ensure compliance with policy terms.
- Officially record the assignment as part of the policy.
Applying for Collateral Assignment
Applying for collateral assignment is a process moderated by your life insurance company designed to secure loans using your life insurance policy as collateral. It involves a series of steps:
Obtain a Collateral Assignment Form
Request a collateral assignment form from your life insurance provider. This form is vital for designating the lender as a collateral beneficiary for the loan amount. Ensure you obtain the correct form, as forms vary based on policy type and insurer.
Fill Out the Form Correctly
Complete the form with accurate details, including policy number, loan amount and lender information. Pay close attention to all sections to avoid errors that could delay or invalidate the assignment. Incomplete or incorrect information can lead to processing delays or rejection.
Sign the Paperwork
Ensure both the policyholder and lender sign the form, confirming the agreement. This dual signature legally binds both parties to the terms of the collateral assignment. Any discrepancy in signatures may question the form's validity.
Submit the Completed Form
Submit the signed form back to the insurance company for processing. Consider using a traceable delivery method for submission to confirm receipt. Delays in submission can impact the timeline of the loan approval process.
Await Approval or Rejection From the Insurance Company
Wait for the insurer to review and approve or reject the collateral assignment. The insurer may request additional information or clarification, which can extend the approval timeline.
Receive a Letter of Acknowledgment
You and your lender will receive a letter of acknowledgment from the insurer if your collateral assignment application is approved.
Obtaining Required Documentation
The required documentation for collateral assignment of life insurance is straightforward. Typically, you'll need to provide two main types of documents for the assignment of a life insurance policy as collateral:
- Collateral Assignment Form: This form is critical because it officially transfers a portion of your life insurance policy benefits to the lender as collateral. It demonstrates to the lender that you have taken the steps to secure your loan against your life insurance policy.
- Original Life Insurance Policy and Proof of Loan: Lenders may require your original life insurance policy to ensure it is valid and enforceable. Proof of the loan agreement or obligation, such as a mortgage note or other loan document, is also commonly required. This establishes the legitimacy of your loan and substantiates the life insurance collateral assignment.
If you need more clarification about documentation requirements, contact your lender to confirm the necessary details to avoid process delays.
Pros and Cons of Collateral Assignment
Using life insurance as collateral can offer a range of benefits and potential drawbacks. Collateral assignment of a policy allows you to secure loans and is often safer than using physical assets as collateral. However, you should also note the inherent risks, primarily that the lender retains the first right to your policy’s death benefit upon your death.
- Lower interest rates on loans.
- Allows you to use the policy and not physical assets as collateral.
- The cash value of your insurance policy continues to grow.
- The lender has the first right to the death benefit.
- Failure to repay the loan can reduce or even eliminate the death benefit.
- Any lapse or cancellation of the policy may lead to violating the loan terms.
Impact of Collateral Assignment on Beneficiaries
While the collateral assignment of life insurance has its benefits, it’s important to remember that it can impact the amount your beneficiaries receive. If you pass away with an outstanding balance on your loan:
Your Lender Will Be Paid First
In the collateral assignment arrangement, the lender is designated as the collateral beneficiary holding the primary claim to the death benefit for the outstanding loan amount. This means if you pass away before fully repaying the loan, the lender is entitled to receive payment from the death benefit first. The amount collected by the lender is limited to the remaining loan balance.
Any Remaining Death Benefit Will Be Disbursed to Your Beneficiaries
After the lender's claim is satisfied, the remaining death benefit is disbursed to your policy’s designated beneficiaries. The amount they receive depends on the loan balance at the time of your death. If the loan balance is substantial, your beneficiaries will receive significantly less than the policy's total death benefit.
This structure underscores the importance of carefully considering life insurance collateral loans and their impact on future financial planning. Policyholders using life insurance as collateral need to understand the terms set forth by loan companies that accept it.
Alternatives to Collateral Assignment
Alternatives to collateral assignment include personal loans , home equity loans or surrendering the life insurance policy for its cash value. None of these options require using life insurance as collateral, and each offers different benefits and risks compared to using life insurance as collateral.
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FAQ About Collateral Assignment
These questions cover various topics related to collateral assignments, including their requirements, implications for beneficiaries and what happens in different scenarios.
A collateral assignment is a contractual arrangement in which a borrower uses their life insurance policy as collateral for a loan. This agreement grants the lender rights to the policy’s death benefit. The lender is prioritized over other beneficiaries until the loan is repaid in full.
In the context of a life insurance collateral assignment, the collateral is the policy's death benefit. This setup allows lenders to be listed as collateral beneficiaries, guaranteeing that they can recover the outstanding loan balance from the death benefit in the event of the borrower’s death before the debt is fully paid.
In a life insurance contract, a collateral assignment allocates the policy's death benefit as security for a loan. This means that if the borrower dies before repaying the loan, the lender, as the collateral assignee of the life insurance, can claim the owed amount from the death benefit. The remaining balance, if any, goes to the designated beneficiaries, ensuring the loan is covered without affecting other assets.
Collateral assignment allows a lender to claim the life insurance death benefit for an outstanding loan amount while naming a life insurance beneficiary designated who receives the death benefit. The lender's claim is prioritized over the beneficiaries' in collateral assignment.
Most types of life insurance policies , including term, whole and universal life, can be used for collateral assignment, provided the insurance company allows it and the policy has sufficient value.
Yes, the policyholder can change beneficiaries after a collateral assignment, but the lender's right to the death benefit amount remains until the loan is repaid. This ensures the lender's position as a collateral beneficiary.
Canceling your life insurance policy before repaying the debt can lead to a breach of the collateral assignment loan agreement. This action may prompt the lender to increase your interest rate or demand immediate repayment of the outstanding loan balance.
These related sections offer additional insights into concepts and alternatives connected to collateral assignments and life insurance:
Using Collateral for a Personal Loan — This link explains how to use various types of collateral for securing a personal loan, providing a broader context to the specific use of life insurance as collateral.
Term vs. Permanent Life Insurance — This resource compares term and permanent life insurance, helping to understand which policies can be used for collateral assignments.
Permanent Life Insurance — This page details permanent life insurance, a type commonly used in collateral assignments due to its cash value component.
Life Insurance Calculator — This page helps you calculate the appropriate amount of life insurance coverage needed, which is crucial when considering using a policy for collateral.
About Nathan Paulus
![what does assignment of life insurance mean Nathan Paulus headshot](https://res.cloudinary.com/moneygeek/image/upload/c_scale,q_auto:eco,f_auto,fl_lossy,w_160/v1660684435/Nathan_Headshot_Nathan_Paulus_1_d018f19d65.jpg)
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.
Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
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What Is A Collateral Assignment Of Life Insurance?
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A collateral assignment is sometimes a necessity if you’re applying for larger financing amounts such as a mortgage or business loan.
But what is a collateral assignment and how do you go about getting it on your life insurance policy?
In this article, we’ll cover what collateral assignment is, how you can add it to your life insurance, and what alternatives there are out there.
What Is Collateral Assignment?
A collateral assignment is a process by which a person uses their life insurance policy as collateral for a secured loan.
In simple terms, collateral assignment is reassigning priorities for who gets paid the death benefit of your life insurance policy.
What Is a death benefit?
A death benefit or face value of a life insurance contract is the amount of money that your beneficiaries will receive from your policy when you die.
Once you apply for collateral assignment and it’s approved, your specified debtor (the loan provider) will be paid first and then your beneficiaries will receive what is left over in your life insurance policy.
This is different from using your cash value to loan money as you are taking out a loan from another financial institution and using your policy as a guarantee that you’ll cover any debt when you die.
For example, let’s say you want to take out a secured loan from your local bank and want to use your life insurance policy as a collateral assignment.
In this situation, you’d still have to pay back any debt you have with interest during the loan period.
However, the life insurance policy would be used if the borrower dies and there was an outstanding loan balance remaining.
Secured Loans vs. Unsecured Loans
Secured loans are debts that are backed by assets that a lender can claim if the debt isn’t repaid. These types of loans often offer better interest rates and more generous payment terms.
Unsecured loans are debts that don’t have collateral. These types of loans are more expensive to repay and considered riskier than secured loans.
![what does assignment of life insurance mean A woman signing up for Collateral Assignment.](https://policyscout.com/_next/image?url=https%3A%2F%2Fimages.ctfassets.net%2Fzd35iqw80kso%2F61bfKbhpRu5kcaPiI5rVd2%2F1eb49ad5a0fb3c844f29cdee0f6f5d36%2Fimage2.png%3Ffm%3Dwebp&w=640&q=75)
Source: Pexels
How Does Applying for Collateral Assignment Work?
The process for getting collateral assignments for life insurance is the same as when you apply for new life insurance coverage.
All you’ll be doing is indicating to your life insurance provider that your lender will be given priority for the amount of money you have borrowed through them.
There is an:
Application process.
Underwriting process.
Offer that you’ll receive.
You’ll be required to name beneficiaries as well as indicate ownership of the life insurance policy in the collateral assignment form which will be provided by your life insurance company.
This is because you’re changing the terms of your payout and your life insurance provider will need to follow these instructions once you die.
NB Some insurance companies don’t offer collateral assignment on new loans and generally only provide this feature to an existing life insurance policy.
You should check beforehand to see what will be required to apply for a collateral assignment. If you need help finding plans that offer this, send an email to a licensed insurance agent today.
Once you’ve assigned a new collateral assignee to your life insurance policy, they will be entitled to lay a claim on your death benefit for any debt you have with them.
For example, let’s say you take out a collateral assignment life insurance policy worth $200,000 for a loan of $75,000 over 7 years at an interest rate of 18%.
If you die after five years, based on these figures, you’ll still have $41,231.02 owed on your loan.
Your $200,000 life insurance plan will be used to cover this and your beneficiaries will receive the remaining $158 768.98 from your life insurance policy.
Your lender is only allowed to take the amount outstanding on the debt owed and cannot take more.
What about Missed Payments and Cash Value Life Insurance?
If you have a permanent life policy with a cash value account, sometimes called cash value life insurance, your lender will have access to it to cover missed payments on your loan.
For example, let’s say you miss a payment on your loan and have a collateral assignment. Your lender will be able to access your cash value account and withdraw that month’s payment to cover your debt.
Who Can You Add as a Collateral Assignee?
You can add any person or institution as a collateral assignee to your life insurance policy if you owe them money.
This can include banks, lenders, private individuals, businesses, or credit card companies.
The most common collateral assignments are for business loans and mortgages. This is because they are loans for high amounts that are paid off over several years.
In fact, some banks and financial lenders may require that you add them as collateral assignees when you apply for any of the financing options mentioned below.
Common Collateral Assignees Include:
💵 Bank loans
💳 Credit cards
🏡 Mortgages
💼 Business loans
What Do I Do If I’ve Paid Off My Debt?
If you’ve managed to pay off your debt - firstly, congratulations! Secondly, you’ll want to notify your life insurance company that you’ll be changing your collateral assignments on your life policy.
While there is no legal claim that a company can make to debts that aren’t owed anymore, there may be a hold up in paying out the death benefit to your beneficiaries and other collateral assignees.
Life insurance companies will have to figure out who must be paid first, according to the order stated in your collateral assignment terms.
In general, life insurance policies will settle claims within 24 hours of being notified of a policyholder’s death.
The process can be delayed if you do not release your collateral assignees from your life insurance contract.
Tips to Make Sure Your Life Policy Is Paid Out Quickly
Here are some tips if you want your beneficiary claims to be handled as fast as possible:
1) Keep a copy of your life insurance policy and policy number in a safe place or with your lawyer, financial advisor, or estate planner.
2) Speak to your beneficiaries about your policies and give them the contact details of the relevant life insurance company.
3) Make sure your life insurance contract is updated to reflect your latest list of beneficiaries.
4) Make sure you have your beneficiaries' details listed in the contract or with your lawyer.
The Benefits of Using Collateral Assignment of Life Insurance
While adding a collateral assignment to your current life insurance policy may require an application, paperwork, and time, there are benefits:
Many lenders like it: Banks and financial institutions sometimes prefer it when applicants use their life insurance policy as collateral for a loan. This is because they know that their debt will be serviced long-term by your insurance company which makes their loan to you a lower risk.
Your private property won’t be jeopardized: The last thing you want when you go into debt is to put your personal items, such as your car, investments, or home on the line as collateral. Using collateral assignment is an alternative to this and can protect you in the event that you can’t service your debt.
It can be affordable for some people: If you’re in good health and young, you may be paying affordable rates for permanent life cover. In situations like this, it can make sense to use your life cover as collateral for debts you’ve incurred.
![what does assignment of life insurance mean A form to sign up for Collateral Assignment.](https://policyscout.com/_next/image?url=https%3A%2F%2Fimages.ctfassets.net%2Fzd35iqw80kso%2F538vxaywBg1C84UfKz3KIX%2F210e4d03dda21d2230cf7e1afa6055ef%2Fimage1.png%3Ffm%3Dwebp&w=640&q=75)
What Are Some Alternatives to Collateral Assignment?
Term Life Insurance: Getting a term life insurance contract to cover specific debts is one way of ensuring your estate and family are protected when you die.
There are multiple types of term life insurance plans and they are more affordable than permanent life insurance. This makes options like level term life insurance and decreasing term life insurance ideal for different types of debts you may have over your lifetime.
What Is Term Life?
Term life is a temporary life coverage option that lasts for a specific period of time. It is different from permanent life insurance which lasts until you die or you stop paying premiums.
Term life contracts are typically between 5 to 20 years, however, you can get renewable term life plans and even a forty-year term life plan .
Borrow from your life insurance: If you have a permanent life insurance policy, such as universal, whole, or indexed life cover, you can borrow money from your cash value account.
However, keep in mind that you’ll be required to pay interest on any amount that you borrow and any amount of debt incurred will be deducted from your policy’s death benefit when you die.
What Is Cash Value?
Cash value is a feature of permanent life insurance plans that policyholders can contribute additional money toward while they have a policy in force.
This money is set aside in a cash value account which is tax-deferred and can be used in a number of ways.
In some cases, if your policy allows it, you can end your contract and get the cash surrender value of it. This amount is usually much less than the value of your total life insurance contract.
Our Verdict on Collateral Assignment
Many banks, lenders, and financial institutions want long-term guarantees that you’ll be able to service your debt if anything happens to you.
In some situations, getting collateral assignments on your life insurance to cover these debts is a good option for people who are trying to access finance from these institutions.
However, there is a risk that your death benefit payout may be delayed for your beneficiaries if you don’t keep your different collateral assignees up to date.
If you already have a life insurance policy, you should contact your provider to find out what the process is and what you’ll need to do to change the collateral assignees on your policy.
If you don’t have a policy yet, our advice is to look at all of your options before you decide to take a permanent life insurance contract with a collateral assignment.
There are alternatives out there that are more affordable if you’re looking to protect your family and estate from debt.
Term life is one such option that is adaptable to your life and easy to get.
For example, a decreasing term life insurance policy might be the right choice for someone who has recently bought a home and wants to cover their mortgage while they pay it back.
Another option is final expense insurance, which is a permanent life policy for smaller amounts, usually under $50,000.
With final expense insurance, your beneficiaries can pay for anything they want, including any debts you may have had in your life.
The process for applying is simple and you won't have to go through a medical exam or intensive underwriting as you would with traditional permanent life insurance.
If you need any assistance with finding, comparing, or learning about the different life insurance options to cover your debts, speak to one of our expert advisors today at 1-888-912-2132 or [email protected] .
Where Can I Learn More about Life Insurance?
If you’re looking to learn more about life insurance, different kinds of coverage, or costs, visit our life insurance hub to find our latest articles.
We do the research so that you don’t have to and our articles cover complicated topics like what is a cash value account, what is key person insurance, or how long life insurance takes to pay out a death benefit.
If you need help with quotes, try out a life insurance quote finder or reach out to us via email at [email protected] to get in touch with a licensed life insurance agent for your state.
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What Is Collateral Assignment (of a Life Insurance Policy)?
Meredith Mangan is a senior editor for The Balance, focusing on insurance product reviews. She brings to the job 15 years of experience in finance, media, and financial markets. Prior to her editing career, Meredith was a licensed financial advisor and a licensed insurance agent in accident and health, variable, and life contracts. Meredith also spent five years as the managing editor for Money Crashers.
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Definition and Examples of Collateral Assignment
How collateral assignment works, alternatives to collateral assignment.
Kilito Chan / Getty Images
If you assign your life insurance contract as collateral for a loan, you give the lender the right to collect from the policy’s cash value or death benefit in two circumstances. One is if you stop making payments; the other is if you die before the loan is repaid. Securing a loan with life insurance reduces the lender’s risk, which improves your chances of qualifying for the loan.
Before moving forward with a collateral assignment, learn how the process works, how it impacts your policy, and possible alternatives.
Collateral assignment is the practice of using a life insurance policy as collateral for a loan . Collateral is any asset that your lender can take if you default on the loan.
For example, you might apply for a $25,000 loan to start a business. But your lender is unwilling to approve the loan without sufficient collateral. If you have a permanent life insurance policy with a cash value of $40,000 and a death benefit of $300,000, you could use that life insurance policy to collateralize the loan. Via collateral assignment of your policy, you authorize the insurance company to give the lender the amount you owe if you’re unable to keep up with payments (or if you die before repaying the loan).
Lenders have two ways to collect under a collateral assignment arrangement:
- If you die, the lender gets a portion of the death benefit—up to your remaining loan balance.
- With permanent insurance policies, the lender can surrender your life insurance policy in order to access the cash value if you stop making payments.
Lenders are only entitled to the amount you owe, and are not generally named as beneficiaries on the policy. If your cash value or the death benefit exceeds your outstanding loan balance, the remaining money belongs to you or your beneficiaries.
Whenever lenders approve a loan, they can’t be certain that you’ll repay. Your credit history is an indicator, but sometimes lenders want additional security. Plus, surprises happen, and even those with the strongest credit profiles can die unexpectedly.
Assigning a life insurance policy as collateral gives lenders yet another way to secure their interests and can make approval easier for borrowers.
Types of Life Insurance Collateral
Life insurance falls into two broad categories: permanent insurance and term insurance . You can use both types of insurance for a collateral assignment, but lenders may prefer that you use permanent insurance.
- Permanent insurance : Permanent insurance, such as universal and whole life insurance, is lifelong insurance coverage that contains a cash value. If you default on the loan, lenders can surrender your policy and use that cash value to pay down the balance. If you die, the lender has a right to the death benefit, up to the amount you still owe.
- Term insurance : Term insurance provides a death benefit, but coverage is limited to a certain number of years (20 or 30, for example). Since there’s no cash value in these policies, they only protect your lender if you die before the debt is repaid. The duration of a term policy used as collateral needs to be at least as long as your loan term.
A Note on Annuities
You may also be able to use an annuity as collateral for a bank loan. The process is similar to using a life insurance policy, but there is one key difference to be aware of. Any amount assigned as collateral in an annuity is treated as a distribution for tax purposes. In other words, the amount assigned will be taxed as income up to the amount of any gain in the contract, and may be subject to an additional 10% tax if you’re under 59 ½.
A collateral assignment is similar to a lien on your home . Somebody else has a financial interest in your property, but you keep ownership of it.
The Process
To use life insurance as collateral, the lender must be willing to accept a collateral assignment. When that’s the case, the policy owner, or “assignor,” submits a form to the insurance company to establish the arrangement. That form includes information about the lender, or “assignee,” and details about the lender’s and borrower’s rights.
Policy owners generally have control over policies. They may cancel or surrender coverage, change beneficiaries, or assign the contract as collateral. But if the policy has an irrevocable beneficiary, that beneficiary will need to approve any collateral assignment.
State laws typically require you to notify the insurer that you intend to pledge your insurance policy as collateral, and you must do so in writing. In practice, most insurers have specific forms that detail the terms of your assignment.
Some lenders might require you to get a new policy to secure a loan, but others allow you to add a collateral assignment to an existing policy. After submitting your form, it can take 24 to 48 hours for the assignment to go into effect.
Lenders Get Paid First
If you die and the policy pays a death benefit , the lender receives the amount you owe first. Your beneficiaries get any remaining funds once the lender is paid. In other words, your lender takes priority over your beneficiaries when you use this strategy. Be sure to consider the impact on your beneficiaries before you complete a collateral assignment.
After you repay your loan, your lender does not have any right to your life insurance policy, and you can request that the lender release the assignment. Your life insurance company should have a form for that. However, if a lender pays premiums to keep your policy in force, the lender may add those premium payments (plus interest) to your total debt—and collect that extra money.
There may be several other ways for you to get approved for a loan—with or without life insurance:
- Surrender a policy : If you have a cash value life insurance policy that you no longer need, you could potentially surrender the policy and use the cash value. Doing so might prevent the need to borrow, or you might borrow substantially less. However, surrendering a policy ends your coverage, meaning your beneficiaries will not get a death benefit. Also, you’ll likely owe taxes on any gains.
- Borrow from your policy : You may be able to borrow against the cash value in your permanent life insurance policy to get the funds you need. This approach could eliminate the need to work with a traditional lender, and creditworthiness would not be an issue. But borrowing can be risky, as any unpaid loan balance reduces the amount your beneficiaries receive. Plus, over time, deductions for the cost of insurance and compounding loan interest may negate your cash value and the policy could lapse, so it’s critical to monitor.
- Consider other solutions : You may have other options unrelated to a life insurance policy. For example, you could use the equity in your home as collateral for a loan, but you could lose your home in foreclosure if you can’t make the payments. A co-signer could also help you qualify, although the co-signer takes a significant risk by guaranteeing your loan.
Key Takeaways
- Life insurance can help you get approved for a loan when you use a collateral assignment.
- If you die, your lender receives the amount you owe, and your beneficiaries get any remaining death benefit.
- With permanent insurance, your lender can cash out your policy to pay down your loan balance.
- An annuity can be used as collateral for a loan but may not be a good idea because of tax consequences.
- Other strategies can help you get approved without putting your life insurance coverage at risk.
NYSBA. " Life Insurance and Annuity Contracts Within and Without Tax Qualified Retirement Plans and Life Insurance Trusts ." Accessed April 12, 2021.
IRS. " Publication 575 (2020), Pension and Annuity Income ." Accessed April 12, 2021.
Practical Law. " Security Interests: Life Insurance Policies ." Accessed April 12, 2021.
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Understanding Life Insurance Assignments: Your Complete Guide
![what does assignment of life insurance mean life insurance assignment](https://www.riskquoter.com/wp-content/uploads/2021/03/assignment-1024x536.png)
A life insurance assignment allows you to transfer the rights of your policy, either temporarily or permanently.
Learn how collateral and absolute assignments can be used for loan collateral, estate planning, and other financial purposes.
Medicaid Planning
What is a collateral assignment.
Collateral assignments are used to secure a lender’s financial interest in your policy in exchange for lending you money.
If you die, the collateral assignment allows the lender to collect your policy’s death benefit up to the amount of the outstanding loan balance.
How Do Collateral Assignments Work?
A typical scenario involves taking out a business loan .
The lender may require a life insurance policy as collateral.
The type of life insurance policy used, whether a term, whole life, or universal life doesn’t matter.
The insurance policy will pay off the balance if you die while the loan is outstanding.
One of the most common uses for collateral assignments is with SBA loans , especially if you do not have other assets to post as collateral.
The collateral assignment applies to the entire policy, including any life insurance rider benefits that may be included.
The Collateral Assignment Process: A Step-by-Step Guide
The process is similar whether you are adding the assignment to an existing policy or buying new coverage.
There are two parties to a collateral assignment.
- Assignor – Is the owner of the life insurance policy
- Assignee – Is the lender
Life insurance companies have standardized forms used for this purpose.
- The owner completes the form and sends it to the lender for review and signature.
- Once completed by the lender, the form is sent to the insurance company.
- The insurance company records the assignment and confirms to the owner and lender that it is complete.
This may all seem confusing if you haven’t used an assignment before, but the reality is that most life insurers make it pretty easy to complete.
Releasing a Collateral Assignment
When you pay off your loan, you have the right to have the collateral assignment released.
It’s a simple process :
- The policy owner completes the form and sends it to the lender.
- The lender signs off on the release. Many companies require a notary as a witness. The lender may return the form to the owner or the insurance company.
- Once completed and returned to the insurance company, the release is recorded, and all parties are notified.
Companies typically complete this process in about a week, and it’s a good idea to confirm everything with the home office to avoid potential issues.
Your agent can help with this.
What Happens to a Collateral Assignment if You Die?
How do collateral assignments work when you die?
Your beneficiary will file a death claim with the life insurer at some point.
Collateral Assignment Tip # 1
If your beneficiary is a loved one, it’s a good idea to let them know that your policy has a collateral assignment so they are not surprised when they file the claim.
Here’s an example of how a death claim with a collateral assignment works:
- Policy Face Amount = $5,000,000
- Beneficiary = Your Spouse
- Original Bank Loan = $200,000
- Outstanding Loan Balance at Death = $100,000
What happens next?
- Your beneficiary will file the death claim with the life insurance company.
- The life insurance company will review the claim and see a collateral assignment attached to your policy.
- The life insurer contacts the lender for an updated payoff figure.
- Payoff amounts are sent directly to the lender.
- Your beneficiary receives the balance of the policy death benefit .
For the above example, your lender would receive $100,000, and your beneficiary would receive the remaining $4,900,000.
Collateral Assignment Tip # 2
NEVER name your lender directly as a beneficiary. If you do, the lender will receive the entire death benefit, and your intended beneficiary will have to go through the lender to receive their share.
Collateral Assignments and Health Issues
While lenders may want a life insurance policy as collateral, obtaining life insurance can sometimes be difficult if the insured has substantial health issues .
If you have an existing life insurance policy in effect, you can use that for the assignment.
Another option that exists in some states is contingent coverage.
Contingent coverage is a one-year policy that you can renew.
The policy will exclude death from the known health issue but provide coverage for new health issues that develop or from accidental deaths .
Many lenders accept this coverage when it’s the only option available. And we’ve also seen lenders waive the collateral assignment requirement at times.
What is an Absolute Assignment?
An absolute assignment is a change of ownership of the policy.
When you want to permanently relinquish your rights to the life insurance policy, an absolute assignment is used.
Examples where absolute assignments are used include:
Life Insurance Settlements
1035 exchange, gifting life insurance to charities, irrevocable life insurance trusts (ilit), business insurance planning.
With this transaction, you are selling your life insurance policy to a third party.
If it is a term policy, you would convert a term policy to permanent insurance before it is sold. In some cases, a company will buy the term policy.
Another example may involve admitting seniors to a nursing home, where the nursing home may take over the policy you have.
A 1035 exchange is a tax-free transfer of cash value from universal life or whole life policy to another similar policy.
You can use absolute assignments to transfer your policy to your favorite charity.
You use absolute assignments to transfer your policy to an ILIT permanently.
An example would be a survivorship policy you and your spouse own that you are transferring to the trust.
Many other potential issues may arise with transfers to an ILIT that are beyond the scope of this article.
If you purchase key person life insurance on an employee, absolute assignments transfer ownership to the employee.
Many times, this happens if the employee leaves the company or retires.
You may have a policy permanently assigned to a nursing home or assisted living facility to help with long-term care expenses.
How Do Absolute Assignments Work?
Life insurance companies have forms used for Absolute Assignments.
Absolute assignment forms require:
- Current owner name, address, and tax ID information.
- New owner name, address, and tax ID information.
- Relationship to the proposed insured.
- Spousal consent in some states and situations.
The completed forms are submitted to the insurance company, recorded, and confirmations are sent to all parties.
Frequently Asked Questions About Life Insurance Assignments
You may have questions about your life insurance assignment and how it works.
The following are general guidelines, as each situation is uniquely different.
Can the collateral assignment change the beneficiary?
No, the collateral assignment does not change the beneficiary.
The life insurance assignment gives the lender the right to receive proceeds equal to their outstanding loan balance.
Can a business be a beneficiary in a collateral assignment of life insurance?
A business can be the beneficiary of a life insurance policy that is collaterally assigned.
Final Words
Life insurance assignments are common for absolute and collateral assignments.
What is most important is that you understand what is involved with this process.
That’s where we’ll help you make the best decision for your life insurance.
There is never any pressure or obligation with our life insurance service.
Please take a few minutes to submit your quote request today. Thank you.
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Absolute Assignment of a Life Insurance Policy
Absolute Assignment means complete Transfer of Rights. The person who transfers the rights is called the Assignor and the person to whom the rights are being transferred is called the Assignee.
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The process of transferring rights of a Life Insurance Policy is called Assignment. There are 2 types of Assignment.
- Absolute Assignment
- Conditional Assignment
Hence Absolute Assignment means completely transferring whole and sole rights of the policy from the Assignor to the Assignee without any further terms and conditions applicable.
The process of assignment is complete only when the original Policy Document has been endorsed or a fresh Policy Document has been issued in favour of the Assignee.
Let’s take an example:
Rahul owns a Life Insurance policy of value Rs 5 lakhs. He would like to gift it to his best friend Ajay.
Thus, in that case, he would like to perform Absolute Assignment of the policy in Ajay’s name such that the death or maturity proceeds are directly paid to him. Rahul’s family members or nominee does not have any right on the policy money.
After the assignment is executed, Ajay becomes the absolute owner of the policy. If he wishes, he may again transfer it to someone else for any other reason. This type of Assignment without any further clauses attached to it is called Absolute Assignment.
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Example in real life of Absolute Assignment happens in case of an Insurance Policy being taken by the employer as a perquisite for the employee. Once the policy is purchased, it is transferred to the employee’s name under Absolute Assignment clause. Hence the employee becomes the owner of the policy, but the employer pays for it till the end. Thus, instead of paying the employee cash, they purchase an insurance policy in their name and add it to their Annual Income Package.
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Financial Tips, Guides & Know-Hows
Home > Finance > What Is An Assignee On A Life Insurance Policy?
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What Is An Assignee On A Life Insurance Policy?
Published: October 14, 2023
Learn the role of an assignee on a life insurance policy and how it can impact your finances. Discover what it takes to become a finance-savvy assignee.
(Many of the links in this article redirect to a specific reviewed product. Your purchase of these products through affiliate links helps to generate commission for LiveWell, at no extra cost. Learn more )
Table of Contents
Introduction, definition of assignee, role of assignee in a life insurance policy, rights and responsibilities of an assignee, process of assigning a life insurance policy, benefits of assigning a life insurance policy, considerations before assigning a life insurance policy, potential challenges and risks for assignees.
Life insurance is a crucial financial tool that provides protection and financial security to individuals and their loved ones in case of unexpected events. While the primary purpose of life insurance is to provide a death benefit to beneficiaries, policy owners also have the flexibility to assign or transfer their policy rights to another person or entity. This is where an assignee comes into play.
An assignee on a life insurance policy refers to the individual or entity who is designated to receive the policy benefits or be the recipient of any policy changes. Assigning a life insurance policy can be a strategic move for policyholders who want to transfer ownership rights or allocate the proceeds to a specific person or organization.
In this article, we will delve deeper into the role of an assignee in a life insurance policy, their rights and responsibilities, as well as the process of assigning a policy. We will also explore the benefits and considerations involved in assigning a life insurance policy, along with potential challenges and risks that assignees may encounter.
Understanding the concept of assignees in life insurance policies is essential for policyholders who may be considering transferring their policy rights or for beneficiaries who need to comprehend the implications of an assigned policy. Without further ado, let’s dive into the details of assignees on a life insurance policy.
An assignee on a life insurance policy is an individual or entity that is designated to receive the policy benefits or take over the ownership rights and responsibilities. When a policyholder assigns their life insurance policy, they transfer their rights to the assignee, who then becomes the new owner of the policy.
The assignee can be a spouse, child, relative, friend, or even a business entity such as a trust or corporation. The assignee can be named at the time the policy is initially taken out, or the policyholder can choose to assign the policy at a later date. In some cases, a policyholder may assign their policy to a lender or creditor as collateral for a loan.
It is important to note that the assignee is distinct from the beneficiary. The beneficiary is the person or entity who receives the death benefit proceeds upon the death of the insured. While the assignee assumes ownership of the policy, they may or may not be the same person as the beneficiary.
Assigning a life insurance policy can be a way for policyholders to ensure that the intended recipient receives the policy benefits or to transfer the financial responsibility and management of the policy to someone else.
Now that we have established the definition of an assignee in a life insurance policy, let’s explore their role in more detail.
The assignee plays a significant role in a life insurance policy once they have been designated as the new owner. Their responsibilities and authority may vary depending on the terms of the policy and the specific agreement between the policyholder and the assignee. Here are some key roles an assignee may have:
- Policy Ownership: As the assignee, they become the legal owner of the life insurance policy. This means they have the rights to manage and make decisions regarding the policy, subject to any limitations or conditions outlined in the assignment agreement.
- Premium Payments: The assignee is generally responsible for paying the premiums to keep the policy in force. They may choose to use their own funds or utilize the policy’s cash value, if available, to cover the premiums.
- Beneficiary Designation: The assignee may have the authority to change the beneficiary designation if permitted by the policy terms. This gives them the ability to redirect the policy’s death benefit to another individual or entity.
- Policy Modifications: Depending on the specific agreement, the assignee may have the power to make changes to the policy, such as increasing or decreasing the coverage amount, adjusting the policy term, or adding additional riders.
- Access to Policy Information: As the new policy owner, the assignee has the right to access and review the policy information, including the policy terms, conditions, and any associated documents.
- Claims Processing: In the event of the insured’s death, the assignee is responsible for initiating the claims process and ensuring that the death benefit proceeds are disbursed to the designated beneficiary.
It’s important to note that the specific roles and authority of the assignee can vary based on the terms of the assignment agreement. It is essential for both the policyholder and the assignee to have a clear understanding of their respective roles and responsibilities to avoid any confusion or disputes in the future.
Now that we have examined the role of an assignee in a life insurance policy, let’s explore the rights and responsibilities they have in more detail.
When an individual or entity becomes the assignee of a life insurance policy, they acquire certain rights and responsibilities associated with the policy. These rights and responsibilities can vary depending on the terms of the assignment agreement and the specific provisions of the policy. Let’s take a closer look at the rights and responsibilities of an assignee:
Rights of an Assignee:
- Ownership Rights: As the assignee, they have the right to the policy benefits and any cash value that has accumulated. They can make decisions regarding the policy, such as changing the beneficiary, modifying coverage, or accessing policy information.
- Premium Payments: The assignee has the right to receive premium payments from the policyholder, which they can use to keep the policy in force. They may also have the right to access the policy’s cash value, if available.
- Policy Modifications: Depending on the terms of the assignment agreement, the assignee may have the right to make changes to the policy, such as adjusting the coverage amount, policy term, or adding additional riders.
- Access to Policy Information: The assignee has the right to access and review the policy information, including the terms, conditions, and any associated documents. This allows them to stay informed about the policy’s provisions and make informed decisions.
- Claims Processing: In the event of the insured’s death, the assignee has the right to initiate the claims process and receive the death benefit proceeds. They are responsible for disbursing the proceeds to the designated beneficiary, if applicable.
Responsibilities of an Assignee:
- Premium Payments: As the assignee, they are responsible for making premium payments to keep the policy in force. This ensures that the policy remains active and the coverage continues.
- Policy Management: The assignee has the responsibility to manage and maintain the policy. This includes reviewing the policy regularly, staying informed about any changes in the terms and conditions, and making decisions that align with the policyholder’s intentions.
- Beneficiary Designation: If authorized by the assignment agreement, the assignee may have the responsibility to change the beneficiary designation if necessary. This involves ensuring that the intended recipient of the death benefit is correctly designated.
- Communication: The assignee has the responsibility to maintain open communication with the policyholder, beneficiaries, and any other parties involved. This helps in addressing any questions, concerns, or changes that may arise regarding the policy.
It’s important for both the assignee and the policyholder to have a clear understanding of these rights and responsibilities to ensure a smooth and effective management of the policy. Now that we have explored the rights and responsibilities of an assignee, let’s move on to understand the process of assigning a life insurance policy.
The process of assigning a life insurance policy involves transferring the ownership rights and control of the policy from the policyholder to the assignee. While the specific steps may vary based on the insurance company and policy terms, the general process typically includes the following:
- Review Policy Terms: The policyholder should carefully review the terms and conditions of their life insurance policy to understand any limitations or restrictions on assigning the policy.
- Choose an Assignee: The policyholder selects an individual or entity to be the assignee. This can be a family member, friend, trust, or even a business entity. It is essential to consider the long-term goals and intentions when choosing an assignee.
- Obtain Consent: The policyholder must obtain the consent of the proposed assignee to ensure they are willing to assume the responsibilities and obligations associated with the policy.
- Prepare Assignment Agreement: The policyholder and the assignee should work together to prepare an assignment agreement. This is a legal document that outlines the terms of the assignment, including the assignee’s rights, responsibilities, and any potential compensation or considerations involved.
- Notify the Insurance Company: The policyholder must contact their insurance company to inform them of the intention to assign the policy. The insurance company may require specific forms to be filled out, along with a copy of the assignment agreement.
- Insurance Company Approval: The insurance company will review the assignment request and the assignment agreement to ensure they comply with their policies and regulations. Once approved, they will update their records to reflect the new assignee.
- Update Beneficiary Designation: If the assignee is different from the original beneficiary, the policyholder may need to update the beneficiary designation to ensure that the intended recipient receives the death benefit.
It is crucial for both the policyholder and the assignee to consult with legal and financial professionals to ensure that the assignment process is conducted properly, adhering to any legal requirements and optimizing the financial outcomes for all parties involved.
Now that we have discussed the process of assigning a life insurance policy, let’s move on to explore the benefits of assigning a life insurance policy.
Assigning a life insurance policy can offer several benefits for both the policyholder and the assignee. Here are some key advantages of assigning a life insurance policy:
- Control and Flexibility: Assigning a life insurance policy allows the policyholder to have control over who will manage and benefit from the policy. It provides flexibility to designate a specific person or entity to take over the ownership rights and responsibilities.
- Estate Planning: Assigning a life insurance policy can be an effective estate planning strategy. It allows the policyholder to transfer assets outside of their estate, which may help in minimizing estate taxes and ensuring a smooth transfer of wealth to the intended recipients.
- Creditor Protection: By assigning a life insurance policy to a trust or business entity, the policy cash value and death benefit may be protected from potential creditors. This provides an added layer of financial security for the assignee and the intended beneficiaries.
- Financial Assistance: Assigning a life insurance policy can be beneficial in scenarios where the assignee needs financial assistance. For example, if the assignee is facing financial hardship or requires funds for a specific purpose, they may be able to access the policy’s cash value or even borrow against the policy.
- Charitable Giving: Assigning a life insurance policy to a charitable organization can be a meaningful way to support a favorite cause. It allows the policyholder to make a significant charitable contribution, and the assignee, in this case, would be responsible for managing the policy and ensuring that the proceeds benefit the designated charity.
It’s important to note that the benefits of assigning a life insurance policy can vary depending on the specific circumstances and goals of the policyholder. Therefore, it is advisable to consult with financial advisors, estate planning professionals, and insurance experts to assess the suitability of assigning a policy and to maximize the potential benefits.
Now that we have explored the benefits of assigning a life insurance policy, let’s move on to discuss some considerations before making the decision to assign a policy.
Before deciding to assign a life insurance policy, it is crucial to carefully consider a few key factors. These considerations will help ensure that the decision aligns with your financial goals and meets your specific needs. Here are some important points to ponder:
- Impact on Beneficiaries: Assigning a life insurance policy may have implications for the intended beneficiaries. It is essential to consider their needs and financial security before assigning the policy to someone else or an entity. Make sure to have open conversations with the beneficiaries to discuss any changes in the policy ownership and how it may impact them.
- Future Financial Needs: Assess your own future financial needs before assigning a life insurance policy. Life circumstances can change, and it is crucial to determine if the policy’s cash value or death benefit might be required for your own financial stability or long-term goals. Balancing immediate financial needs with the desire to assign the policy is important.
- Trustworthiness of the Assignee: Consider the trustworthiness and reliability of the proposed assignee. Assigning a life insurance policy involves transferring ownership rights and responsibilities, so it is crucial to choose someone who will effectively manage the policy and fulfill the agreed-upon obligations. Conduct thorough due diligence and consider seeking legal advice to ensure the assignee is the right choice.
- Tax Implications: Assigning a life insurance policy may have tax implications. Consult with tax professionals to understand any potential tax consequences of the assignment, such as gift tax or estate tax considerations. Proper planning and knowledge of tax laws will help mitigate any unexpected tax liabilities.
- Insurance Company Policy: Review the terms and conditions of your life insurance policy regarding assignments. Some policies may have restrictions or limitations on assigning a policy, and it’s important to understand these provisions. Contact your insurance company directly to clarify any concerns or questions related to the assignment process.
- Legal Considerations: Assigning a life insurance policy involves legal documentation and agreements. It is advisable to consult with legal professionals who specialize in insurance and estate planning to ensure that the assignment is conducted in compliance with applicable laws and meets your specific needs.
Considering these factors will help you make an informed decision about whether assigning a life insurance policy is the right choice for you. Assess your individual situation, speak with professionals, and review your long-term goals to determine if assigning the policy aligns with your overall financial plan.
Now that we have explored the considerations before assigning a life insurance policy, let’s discuss some potential challenges and risks for assignees.
While assigning a life insurance policy can have its benefits, there are also potential challenges and risks that assignees should be aware of. Understanding these risks will help you make informed decisions and take necessary precautions. Here are some potential challenges and risks for assignees:
- Financial Responsibility: As the assignee, you become responsible for paying the policy premiums to keep the coverage in force. Failure to pay the premiums can result in the policy lapsing, causing loss of coverage and potential loss of the policy’s cash value.
- Potential Conflict: Assigning a life insurance policy may lead to conflicts, especially if the policyholder has multiple beneficiaries or if the assigned policy conflicts with other estate planning arrangements. It is important to communicate and coordinate with all involved parties to minimize potential disputes.
- Changing Circumstances: Life circumstances can change, and the assigned policy may no longer align with the assignee’s needs or financial goals. Review the policy periodically to ensure it still meets your objectives. If necessary, consult with professionals to explore options for policy modifications or changes.
- Loss of Control: By assigning a policy, you relinquish control over certain aspects of the policy. The assignee may need to consult the policyholder or beneficiaries before making any changes or important decisions. This loss of control should be carefully considered before proceeding with the assignment.
- Insurance Company Approval: The insurance company typically has the final say in approving the assignment. They will review and confirm the assignment agreement to ensure compliance with their policies. If the assignment is not approved, it can impede the intended transfer of ownership.
- Tax Implications: Assigning a life insurance policy may have tax consequences for the assignee, such as potential income tax on the policy’s cash value or estate tax implications. Consult with tax professionals before finalizing the assignment to fully understand these potential tax implications.
It is crucial for assignees to carefully weigh these challenges and risks against the potential benefits before accepting the assignment of a life insurance policy. Be proactive in communicating with the policyholder and beneficiaries, stay informed about policy details, and seek professional guidance to navigate any potential challenges or risks.
Now that we have discussed the potential challenges and risks for assignees, let’s wrap up our article.
Assigning a life insurance policy can be a strategic financial move that offers flexibility and control over the policy’s ownership and benefits. By designating an assignee, individuals can ensure that the policy proceeds are directed to the intended recipient or utilize the expertise of an entity to manage the policy. However, before proceeding with an assignment, it is important to carefully consider various factors.
Understanding the role, rights, and responsibilities of an assignee is vital to ensure a smooth transition and effective management of the policy. The assignee assumes ownership of the policy, enjoying benefits such as decision-making authority and control over premiums. They also have responsibilities, including making premium payments, managing the policy, and initiating claims if the insured passes away.
The process of assigning a life insurance policy involves reviewing policy terms, choosing an assignee, obtaining consent, preparing an assignment agreement, and notifying the insurance company. It is crucial to review the policy specifics and consult legal and financial professionals to ensure compliance with regulations and optimize financial outcomes.
Assigning a life insurance policy offers numerous benefits, such as control, estate planning opportunities, creditor protection, and financial assistance. However, there are considerations to keep in mind, including the impact on beneficiaries, future financial needs, and tax implications.
Assignees may face potential challenges, such as financial responsibility, conflicts of interest, changing circumstances, loss of control, and insurance company approval. These risks should be carefully assessed, and open communication with the policyholder and beneficiaries is essential to minimize disputes and ensure a smooth transition.
In conclusion, assigning a life insurance policy requires thoughtful deliberation and consultation with professionals. Assessing your financial goals, considering the needs of beneficiaries, and understanding the potential risks will help make an informed decision. Assigning a life insurance policy can provide peace of mind, but careful consideration and planning are essential to ensure the assigned policy aligns with your long-term financial goals.
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Absolute Assignment of Life Insurance Policies
![PhotoObjects.net/PhotoObjects.net/Getty Images An absolute assignment transfers all ownership rights of a life insurance policy.](https://img-aws.ehowcdn.com/600x600p/photos.demandstudios.com/getty/article/163/56/90310823.jpg)
An absolute assignment transfers all ownership rights of a life insurance policy.
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More Articles
- 1. What Is the Assignment of Insurance Benefits?
- 2. What Is a Life Insurance Assignment?
- 3. Does Life Insurance Count Towards the Two Million for Federal Estate Tax?
An absolute assignment of a life insurance policy involves transferring all rights and ownership decisions to another party. You could have one of several reasons for wanting to do this; for example, using the policy as collateral for a loan, or making a donation to your favorite charity at death. Making an absolute assignment is relatively simple as long as your life insurance policy allows it.
How Transfer of Ownership Works
Absolute assignment is akin to a transfer of ownership, in that you are giving all ownership rights to another party. Although you remain the insured under the contract, the new party can change the beneficiary (usually to itself), it can make decisions about investment options of a whole-life policy, and it can take any other action that does not jeopardize the policy's in-force status. You remain responsible for the premium payments, and you could be in breach of the assignment provisions if you don't pay them.
Collateral Loan Bank Assignment
Absolute assignment of life insurance is often done when a person applies for a loan. If the bank is concerned that the loan might not be repaid if you died, if might require a life policy with an absolute assignment to the bank. The bank names itself the beneficiary of the policy up to the amount of the loan balance. Any residual death benefit would go to your named beneficiary.
Financing a Charitable Gift
Another use of absolute assignment is to make a charitable gift. This approach is gaining in popularity.
Life insurance is often purchased to finance a charitable donation by the estate of a deceased individual. One drawback to this approach is that the entire gift goes through the estate and might incur probate delays and fees.
The use of an absolute assignment streamlines the process, as the charity can name itself the beneficiary of the policy. The charity can issue you a tax receipt for every premium, which you can deduct as a charitable contribution.
Absolute Assignment Legal Considerations
Insurance companies freely provide assignment forms that are straightforward and easy to fill out. Once an assignment is complete, a copy of the form should be filed with the insurance company.
The life insurance company may withhold part of its payout to any beneficiary -- including a newly designated one -- if a premium hasn't been fully paid, or because of other indebtedness. That might have legal ramifications for you and the assignee, in which the insurance company will take no part.
- Standard Life Insurance Co. of New York: Absolute Assignment Form
- Waypoint Partners: Assigning Your Life Insurance Policy
- Collateral Assignment Agreement
Philippe Lanctot started writing for business trade publications in 1990. He has contributed copy for the "Canadian Insurance Journal" and has been the co-author of text for life insurance company marketing guides. He holds a Bachelor of Science in mathematics from the University of Montreal with a minor in English.
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What does it mean when an insurance policy is assigned?
Assignment — a transfer of legal rights under, or interest in, an insurance policy to another party . In most instances, the assignment of such rights can only be effected with the written consent of the insurer.
What does policy assigned mean?
What does has this insurance been assigned mean.
Assignee in an Insurance Policy In the context of a life insurance policy, interest in a policy can be transferred from the policyholder to a lender or relative by assignment of the policy. In this case, the policyholder is the assignor and the person in whose favor the policy has been assigned is called the assignee.
What happens when you assign an insurance policy?
Assignment of a Life Insurance Policy simply means transfer of rights from one person to another . The policyholder can transfer the rights of his insurance policy to another for various reasons and this process is called Assignment.
Who pays premium when a policy is assigned?
In the case of an assignment against a loan the assignor can continue to pay the policy premiums and claim the Section 80C tax benefit on them as the policy is on his life and he is the person paying the premiums.
Assignment of Insurance Policy. | Transfer of Insurance Policy | Lectures on Insurance Law.
What is the effect of assignment to the policy owner?
In insurance the assignment means assignment of rights under the contract. An assignee for all purposes becomes the owner of the policy and enjoys all rights thereunder . However, by assignment no change is made in the subject matter insured by the policy and it remains unaltered.”
Does assignment cancel nomination?
The assignment may lead to cancellation of the nomination in the policy only when it is done in favour of the insurance company due to a policy loan . Assignment for all insurance plans except for the pension plan and the Married Women's Property Act (MWP), can be done.
Is assignee the same as beneficiary?
When you fill out a collateral assignment form, that assignment supersedes your beneficiaries' rights to the death benefit. If you die, the life insurance company pays the lender, or assignee, the loan balance . The remainder of your death benefit — if there is one — goes to your beneficiaries.
What is the meaning of assignee in insurance?
Definition: A person, an entity or a trust who receives the rights, ownership and benefits of an insurance policy or a contract is the assignee.
What is the procedure for assignment in life policy?
Assignment of a life insurance policy may be made by making an endorsement to that effect in the policy document (or) by executing a separate 'Assignment Deed' . In case of assignment deed, stamp duty has to be paid. An Assignment should be signed by the assignor and attested by at least one witness.
Why would you assign a life insurance policy?
A life insurance assignment is a document that allows you to transfer the ownership rights of your policy to a third party , transferring to that third party all rights of ownership under your policy, including the rights to make decisions regarding coverage, beneficiary and investment options.
What are the two types of assignments in life insurance?
- An absolute assignment is typically intended to transfer all your interests, rights and ownership in the policy to an assignee. ...
- A collateral assignment is a more limited type of transfer.
Who is appointee life insurance?
Appointee is the person to whom the proceeds/benefits secured under the Policy are payable if the benefit becomes payable to the nominee and the nominee is minor as on the date of claim payment .
What happens when the assignee dies?
If the assignee dies, the assignment does not get cancelled . The legal heirs of the assignee become entitled to the policy money. Assignment is a legal transfer of all the interests the policyholder has in the policy to the assignee.
What you mean by assignment?
Definition of assignment 1 : the act of assigning something the assignment of a task. 2a : a position, post, or office to which one is assigned Her assignment was to the embassy in India. b : a specified task or amount of work assigned or undertaken as if assigned by authority a homework assignment.
What are the rights of the assignee?
An assignee usually receives the contract rights and obligations directly from an original party to the contract . An assignee can be an individual, a group, or a business. In our scenario, I assign my right to receive benefits to Green.
Who is called assignee?
Assignee is a person to whom a right is transferred by the person holding such rights under the transferred contract (the “assignor”). The act of transferring is referred to as “assigning” or “assignment” and is a concept found in both contract and property law.
Can Term Plan be assigned?
Given that you already have coverage of ₹30 lakh, you could take an additional term plan of ₹20 lakh. Both these plans could be assigned to the bank . Additionally, you could buy term insurance equal to 19 times of your income. Such plan need not be assigned to the bank.
Is an assignee a third party beneficiary?
Assignees ( outsiders who acquire rights after the contract is made ) Delegatees (outsiders who acquire duties after the contract is made) Third-party beneficiaries (outsiders who acquire rights when the original contract is made)
Are life insurance policies assignable?
You can freely assign your life insurance policy unless some limitation is specified in your contract (your insurance company can furnish the required assignment forms). Through an assignment, you can transfer your rights to all or a portion of the policy proceeds to an assignee.
What is the difference between assignment and nomination in insurance?
Nomination and Assignment serve different purposes. The nomination protects the interests of the insured as well as an insurer in offering claim benefits under the life insurance policy. On the other hand, assignment protects the interests of an assignee in availing the monetary benefits under the policy.
What is difference between assignee and nominee?
The person thus chosen legally by the policy holder is called 'Nominee'. The word assignment means the legal transfer of all the rights and benefits of the policy to the person to whom the policy holder has assigned it. Here the person assigned by the policy holder through a legal procedure is called the 'Assignee' .
What happens if a nominee dies before the maturity of insurance?
What happens if the nominee dies before the policyholder? If the nominee dies before the policyholder, the proceeds are payable to policyholder or his heirs or legal representatives or holder of succession certificate .
What is difference between assign and transfer?
When used as verbs, assign means to set apart or designate something for a purpose while transfer means to pass or move from one person, place, or thing to someone or someplace else .
Can a life insurance policy owner revoke an absolute assignment?
Nope. Absolute assignments are permanent and cannot be revoked .
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What is an Assignee on a Life Insurance Policy?
When people take out a life insurance policy, it’s typically a step taken to prepare your loved ones for life after you pass away. What you may not know is that insurance policies are owned entities, which means they can be used as collateral for a loan or even be sold to offer money to you when you’re in a tough spot. There are also different methods available to do this, which we’ll explain in this article.
An individual who is taking out insurance will have many choices, such as whether you prefer to purchase whole life insurance or term life insurance . You also have choices when it comes to using your policy to leverage money that has already been invested in it.
Part of that is understanding the difference between a collateral assignment and an absolute assignment, so you can be sure to choose the solution that works best with your financial needs. The other part of it involves knowing the most important terms related to an assignment so that you go in with the knowledge you need.
Collateral Assignment of Life Insurance
If you have ever taken out a standard personal loan, a collateral assignment of life insurance has a lot of similarities to that process. The collateral for the loan is the life insurance policy and an organization or individual who pays out the loan is the assignee . They are also the ones who take over the policy on a conditional basis.
One important thing to know is that the assignee cannot resell the policy, make use of its cash value, or make changes to it. The assignee may only take the money for the death benefit if you, as the policyholder, default on the loan.
In the typical situation, if the collateral assignment is standing at your death, the assignee will let the insurance company know about the debt remaining, including interest. They will then be provided with that amount. If there are extra benefits, those will go to your beneficiary listed in the policy.
Absolute Assignment of Life Insurance
Another way to acquire a loan using life insurance is through an absolute assignment. This differs from collateral assignment since instead of using the loan as collateral, you are signing the full policy over to a person or entity. This person or business is considered the assignee, while the person who is selling the policy is the assignor.
The individual who buys the insurance policy gains ownership of the policy. This makes them responsible for the premiums and lets them make changes or choose different beneficiaries .
Each absolute assignment will have different terms based on the contract that is signed. For instance, it might explain that the assignor is transferring all title, rights, and interest in the policy to the assignee. Depending on the insurance company, an ownership clause may be used to make the transfer itself.
Understanding Policy Provisions
To ensure the assignee is protected, the insurance company needs to be notified that an assignment is in place. If the company doesn’t have notice of the assignment, the process might be paid to a beneficiary or a different assignee. This can be an issue since the insurance company will not pay the amount out again to another person.
Many life insurance policies come with policy provisions related to assignments. The most common include:
- The assignment is subject to all indebtedness related to the insurance company regarding the policy.
- The assignment only becomes binding when the original or duplicate is filed at the insurance company’s home office.
- The insurance provider has no responsibility for the sufficiency, effect, or the validity of the assignment.
Because of these provisions, it’s crucial to ensure that you make the assignment correctly. This applies whether it is an absolute assignment or a collateral assignment. The best thing you can do to avoid problems is to speak with an experienced insurance professional who can guide you to the best solution for your needs.
Comparing Assignments Among Life Insurance Policies
If you are in a situation where you need money and it needs to happen quickly, ask yourself whether your cash value in your life insurance policy could help you out. After you decide the answer to that, make sure that you consider the larger picture.
Going with an absolute assignment approach may be able to offer you a large sum of money at one time. However, you also need to realize that your family and loved ones will no longer have the protection that was provided by the policy. If this is a policy that you have been dutifully paying into for decades, losing all the value is something you need to decide whether you’re ready for.
On the other hand, a collateral assignment doesn’t whisk away the policy in its entirety. You can get control of your policy back as soon as you resolve your financial problem and pay back the loan. A collateral assignment is one of the most common ways to borrow from a life insurance policy to use the cash value on necessities.
Collateral assignments let you regain the benefits associated with a long-term life insurance policy at some point in the future. Since most people are familiar with paying off student loans, auto loans, and mortgages, this agreement is similar. Making all of the payments on time can help with both financial concerns in the present as well as creating long-term financial success.
Selecting Between Life Insurance Assignment Options
Every person is unique and will be in a different situation when considering a life insurance assignment. For one person, choosing a collateral assignment might be the right choice since the individual wants the life insurance benefits back after paying off the loan. Someone else may not be interested in those benefits and need a larger amount of money, which an absolute assignment can offer.
You’ll want to consider all your options before borrowing through your life insurance , whether that involves an assignment or another type of loan. Be aware of all of your options and make sure your choice is right for the present and your future financial situation.
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- How IUL Insurance Works
- Pros of IUL
- Cons of IUL
- IUL vs. Other Policies
- Is IUL Right for You?
The Bottom Line
- Life Insurance
- Policy Types
Pros and Cons of Indexed Universal Life Insurance
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Indexed universal life (IUL) insurance offers the benefit of market gains while building cash value and guarantees beneficiaries a payout upon death. Like other types of universal life insurance , IUL holds a cash value that increases as premiums are paid. You can receive the cash value if you cancel the policy, or you can take out a loan and use the funds for other purposes.
Also known as equity-indexed universal life insurance, IUL insurance puts a portion of the premiums toward annual renewable term life insurance . The remainder is added to the cash value of the policy after fees are deducted. The cash value is credited on a monthly or annual basis with interest based on increases in an equity index . While IUL insurance may prove valuable to some, it’s important to understand how it works before purchasing a policy.
Among the pros of IUL insurance is the potential for higher returns. There are cons, however, such as the fact that higher returns are not guaranteed.
Key Takeaways
- Indexed universal life insurance policies provide greater upside potential, flexibility, and tax-free gains.
- This type of life insurance offers permanent coverage as long as premiums are paid.
- Some of the drawbacks include caps on returns and no guarantees as to the premium amounts or market returns.
- An IUL insurance policy may be canceled if you stop paying premiums.
- IUL policies are generally best for those with large up-front investments who want options for a tax-free retirement.
How Indexed Universal Life Insurance (IUL) Works
IUL insurance is pitched as a cash-value policy that benefits from tax-free market gains without the risk of loss during a market downturn. Insured parties can link a percentage of the policy’s cash value to a market index , such as the S&P 500 or the Nasdaq 100 . As the index moves up and down, the rate of return also moves on the policy. Different policies have different maximum levels for the amount you can invest, up to 100%.
A percentage of the interest income, which is called the participation rate , is added to the cash value of the policy if the indexed account shows gains (usually calculated over a month). This is usually annually or once every five years. So if the gain is 4%, the participation rate is 50%, and the current cash value total is $10,000. This means $200 is added to the cash value (4% × 50% × $10,000 = $200).
If the index falls in value or remains steady, the account nets little or nothing. But there's one benefit: the policyholder is protected from incurring losses.
Although they perform like securities , IULs are not considered investment securities. “The cash value is not [actually] invested in the market or an index,” said Jordan Niefeld, CPA , CFP , of Raymond James & Associates in Aventura, Florida. “The index is just a measuring device to determine the interest crediting rate on the cash value account.”
As with any kind of universal life insurance, it’s important that you do your research to ensure that your insurance provider is a reputable universal life insurance company.
Investopedia / Nez Riaz
Advantages of Indexed Universal Life Insurance
Higher return potential.
A significant advantage of IUL insurance is the potential for gains in the cash value that can potentially be higher than those on other types of life insurance, such as traditional universal life or whole life insurance policies.
Policyholders also get the benefit of a crediting floor, which is typically 0% or 1%. Having this means the existing cash value is protected from losses in a poorly performing market. “If the index generates a negative return , the client does not participate in a negative crediting rate,” Niefeld said. In other words, the account will not lose its original cash value.
Tax Advantages on Capital Gains
The cash value accumulates tax deferred, and the death benefit is tax-free for beneficiaries . Loans made against the policy are also tax-free in many cases. Premiums are paid with after-tax dollars, so partial and full withdrawals (up to the amount paid in premiums) are also tax-free.
Death Benefit
IUL insurance, like other types of life insurance , can provide a death benefit for your loved ones. This money can be used to:
- Use for funeral expenses
- Cover outstanding debts such as a mortgage or co-signed student loans
- Fund college costs for children
- Pay for everyday living expenses
This death benefit can be passed on to your beneficiaries tax-free.
No Social Security Impact
Social Security benefits may be an important source of income in retirement. You can begin taking Social Security as early as age 62 or defer benefits up to age 70. Taking benefits ahead of your full retirement age can shrink your benefit amount, as can working while receiving benefits. You’re only allowed to earn so much per year prior to reaching full retirement age before your benefits are reduced.
Cash value accumulation from an IUL insurance policy wouldn’t count toward the earnings thresholds, nor would any loan amounts that you borrow. So, you could take a loan against your policy to supplement Social Security benefits without detracting from your benefit amount.
Other Perks
A variety of riders , or additional provisions, can make the policy more attractive and more valuable, including guaranteed premiums, guaranteed death benefits , and provisions for long-term care and critical illness.
Disadvantages of Indexed Universal Life Insurance
There are several potential drawbacks associated with IUL insurance policies. For instance, someone who establishes the policy over a time when the market is performing poorly could end up with high premium payments that don’t contribute at all to the cash value . The policy could then potentially lapse if the premium payments aren’t made on time later in life, which could negate the point of life insurance altogether.
We've highlighted some of the potential downsides below.
Limited Gains
Increases in the cash value are limited by the insurer. Insurance companies often set maximum participation rates of less than 100%. In addition, returns on equity (ROE) indexes are often capped at certain amounts during good years. These restrictions can limit the actual rate of return that’s credited toward your account each year, regardless of how well the policy’s underlying index performs.
In that case, you may be better off investing in the market directly or considering a variable universal life insurance policy instead. But it’s important to consider your personal risk tolerance and investment goals to ensure that either one aligns with your overall strategy.
The insurer makes money by keeping a portion of the gains, including anything above the cap.
The crediting rate cap may limit gains in a bull market . If the investor’s money is tied up in an insurance policy, it can potentially underperform other investments. Depending on how the market performs, the insured may realize no gains at all.
No Guarantees for Returns
The potential for a greater rate of return is one advantage to IUL insurance policies compared to other life insurance policies. However, larger returns are not guaranteed. Returns can in fact be lower than returns on other products, depending on how the market performs. Policyholders have to accept that risk for potentially higher returns.
Costs and fees associated with an indexed universal life insurance policy can also affect profits.
As with any product tied to equities, IUL does include risks. IUL insurance carries greater risk than standard universal life insurance, but less risk than variable life insurance policies (which do actually invest in stocks and bonds). Also, depending on the policy, the premiums could potentially rise if the measuring index performs consistently below the anticipated rate.
In the event of death with outstanding loans against the policy, the outstanding loan funds may be subject to regular income tax . In the event of policy cancellation, gains become taxable as income. Losses are not deductible.
Fees and Costs
Fees are typically front-loaded and built into complex crediting rate calculations, which may confuse some investors. Fees can be high. Costs vary from one insurer to the next and depend on the age and health of the insured.
These fees can include:
- Premium Expense Charge : This is usually deducted from the premium before it is applied to the cash value
- Administrative Expenses : This is normally deducted monthly from the cash value of the policy
- Insurance Costs : These are additional deductions taken from the policy to cover the death benefit, supplemental benefits, and riders
- Fees and Commissions : Some policies charge up-front or annual fees for setting up or managing the account.
- Surrender Charge : This is the amount forfeited if the policy is canceled or if loans or withdrawals are made. In some cases, taking a partial withdrawal will also permanently reduce the death benefit.
Canceling or surrendering a policy can lead to more costs. In that case, the cash surrender value may be less than the cumulative premiums paid.
Indexed Universal Life (IUL) Insurance Pros and Cons
Provide higher returns than other life insurance policies
Allows tax-free capital gains
IUL does not reduce Social Security benefits
Policies can be designed around your risk appetite
Returns capped at a certain level
No guaranteed returns
IUL may have higher fees than other policies
Indexed Universal Life Insurance vs. Other Life Insurance Policies
Unlike other types of life insurance, the value of an IUL insurance policy is tied to an index tied to the stock market. This means that the returns may vary, depending on the performance of the underlying index.
There are many other types of life insurance policies, explained below.
- Term life insurance offers a fixed benefit if the policyholder dies within a set period of time, usually 10 to 30 years. This is one of the most affordable types of life insurance, as well as the simplest, though there’s no cash value accumulation.
- Whole life insurance is more permanent and the policy lasts for the entire life of the policyholder as long as premiums are paid. The policy gains value according to a fixed schedule, and there are fewer fees than an IUL insurance policy. However, they do not come with the flexibility of adjusting premiums.
- Variable life insurance comes with even more flexibility than IUL insurance, meaning that it is also more complicated. A variable policy’s cash value may depend on the performance of specific stocks or other securities, and your premium can also change. For this reason, variable life insurance is considered riskier than other life insurance policies.
Is Indexed Universal Life Insurance Right for You?
Now that you know the basics of indexed universal life insurance, you're probably wondering whether it's the right choice for you. If you're mulling over this kind of policy, it's a good idea to take the following into consideration:
- Flexibility: Enrolling for an IUL provides you with some degree of flexibility. Many insurance companies allow you to pay premiums when your financial situation permits it and you have available free cash flow .
- Consistent Coverage: An IUL policy can provide you with the same type of coverage protection that a permanent life insurance policy does.
- Cash Value and Growth: Remember, this kind of insurance remains intact throughout your entire life just like other permanent life insurance policies. It also allows you to build cash value as you get older through a stock market index account. As the cash value grows, you can lower your premiums without affecting your death benefit.
Keep in mind, though, that if there's anything you're unsure of or you're on the fence about getting any type of insurance, be sure to consult a professional. This way you'll know if it's affordable and whether it fits into your financial plan.
How Much Does Indexed Universal Life Insurance Cost?
The cost of an indexed universal life policy depends on several factors. Like any insurance product, the premiums are higher as you get older. So a 50-year-old pays a higher premium than someone in their 30s. Premiums also vary based on your gender and health conditions, so if you're a smoker, you'll end up paying more. Other considerations that factor into your premiums include additional fees like commissions, expense fees, and administrative costs, which may be added to the beginning of your policy. Be sure to check with your insurance agent for the exact premiums and associated fees.
Can I Withdraw my Cash Value?
You can typically withdraw the cash value of a whole life insurance policy on a tax-free basis up to the amount of premiums you’ve paid. You can also borrow against a cash value, use a cash value toward premium payments, or cancel the policy to receive the cash value. Unlike with a traditional 401(k) or individual retirement account, you do not have to wait until you are 59½ years old to use the funds.
Can I Sell My IUL?
You can sell your indexed universal life insurance policy and stop making premium payments. However, you will lose the death benefit named in the policy.
Is IUL Insurance Better Than a 401(k) Plan?
Indexed universal life insurance and 401(k) plans all have their own advantages. A 401(k) has more investment options to choose from and may come with an employer match. On the other hand, an IUL comes with a death benefit and an additional cash value that the policyholder can borrow against. However, they also come with high premiums and fees, and unlike a 401(k), they can be canceled if the insured stops paying into them.
Indexed universal life insurance can help you meet your family’s needs for financial protection while also building cash value. However, these policies can be more complex compared to other types of life insurance, and they aren’t necessarily right for every investor. Talking to an experienced life insurance agent or broker can help you decide if indexed universal life insurance is a good fit for you.
National Association of Insurance Commissioners. “ Life Insurance .”
North American Co. “ Understanding Indexed Universal Life Insurance .”
Nationwide Financial. “ Nationwide IUL Accumulator II 2020: Quick Estimator .”
Internal Revenue Service. “ Do I Report Proceeds Paid Under a Life Insurance Contract as Taxable Income? ”
Social Security Administration. " Receiving Benefits While Working ."
Experian. “ Can I Withdraw Money from My Life Insurance? ”
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What is an annuity?
How annuities work.
- Pros and cons of annuities
Types of annuities
- Tax treatment
Annuity fees
- The bottom line
What is an annuity and how does it work? Definition, types, and more
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- Annuities are investment product issued by an insurer that provides steady income during retirement.
- An annuity charges a premium upfront with other management fees often rolled into the cost.
- Fixed, variable, and indexed annuities offer different investment options with varying risk profiles.
When putting away money for retirement, it can be difficult to know if you're saving enough. Even if you think you've got it all covered, there's little certainty about how much you'll actually spend or how long you'll live after you're through working.
That's where annuities come in. These unique combinations of insurance and investment features help investors save for retirement and offer assurance they won't outlive their hard-earned savings.
Learn more about annuities below and what you'll want to take into consideration before you add them to your portfolio.
An annuity is an investment you buy in exchange for periodic payouts, typically during retirement.
"You generally put a lump sum or multiple payments into an account with an insurance company and you make a contract with them. The promise is that they're going to pay you a certain amount. It could be a lifetime benefit or a 10-year benefit," says Jordan Gilberti financial planner and senior lead planner at Facet.
People can purchase annuities using either pre-tax or after-tax dollars from select insurance companies, banks, brokerage firms, and mutual fund companies.
"There are multiple kinds of annuities. But they're all going to have some drawbacks and disadvantages that make them not necessarily suitable for everyone," stated Gilberti.
With non-qualified annuities (aka annuities bought with after-tax dollars), only investment gains are taxed at the time of withdrawal so you won't be taxed on the original contribution amount. Qualified annuities, on the other hand, are annuities bought with pre-tax dollars so the entire withdrawal amount will be taxed.
What is an annuity fund?
Annuity funds are investment portfolios, similar to mutual funds , that you're contributing money toward in the hope of earning gains. The money you've purchased your annuity with is often invested in fairly low-risk securities like corporate or government bonds.
That says, a variable annuity fund tends to be more volatile as it invests in riskier money market funds, mutual funds, and other market-based investments.
A modern-day annuity is a contract between you and an insurance company. To get an annuity, you'll need to pay a premium — usually a large lump sum — and then the insurer invests it. Afterward, the insurer provides you with a stream of payouts for a predetermined number of years or even the remainder of your lifetime.
An annuity has two phases:
- the accumulation phase: The accumulation phase of an annuity is the period when you're making payments. Those funds may be split among various investment options.
- the annuitization phase: The annuitization phase is the period when you receive payouts from the annuity, much like a regular paycheck. This can last for a set amount of years or the rest of your life. The payouts include the principal amount along with any investment gains.
Annuities provide a stable investment option for savers who worry about market volatility or outliving their retirement savings.
Annuities: Pros and cons
Pros | Cons |
At their core, annuities are full of advantages:
- Reliable income for a set amount of time. Once you've made your payments, you're guaranteed to receive payouts for the rest of your life or someone else's life, like your spouse.
- Death benefits. You may also designate a beneficiary on your annuity. This beneficiary will receive the payouts if you die beforehand.
- Tax-deferred savings. Before you start receiving payouts, annuity income and investment gains grow tax free.
Unfortunately, there are major drawbacks to consider as well:
- Big fees. Annuities typically have high fees and commissions which can really cut back on the long-term earning potential. Because of this, annuities aren't a great place to grow money, but fixed immediate annuities take a smaller fee hit while generating a lifetime income stream.
- Illiquidity. Variable annuities have limited liquidity and don't offer access to your money until after several years, typically six to eight years but sometimes longer. If you do withdraw funds or cancel your annuity contract before that surrender period ends, you incur a surrender fee that can initially reach as high as 10% of your contributed funds, decreasing by one percentage point each consecutive year. Once your payouts start, it's next to impossible to change them or access more of your principal.
- Taxable income and tax penalties. Annuities aren't totally tax-free. As a source of income, annuity payouts are subject to income tax as you receive them. If you withdraw from your annuity before you're 59 ½, you'll face a 10% penalty on top of your ordinary income tax as well.
"Typical annuities have some disadvantages, like a lack of flexibility, lack of investment options, and a lot of times you have to make the trade-off of getting potentially higher returns to get those guaranteed payments," says Gilberti.
Different types of annuities vary in how your money is invested and the level of risk involved.
Fixed annuities
Fixed annuities place your money in a general account (often through an insurance provider), which promises a minimum rate of interest and a fixed amount of periodic payouts. The premiums for fixed annuities are invested in high-quality, low-risk fixed securities such as bonds
Although fixed securities pose less risk compared to more volatile stocks or mutual funds, you won't generate as many gains as you would with a variable annuity. However, most fixed annuities do include a guaranteed minimum interest rate.
Before investing in a fixed annuity, make sure that your state insurance commission confirms your insurance broker, bank, or lender is registered to sell fixed annuities.
Variable annuities
Variable annuities place your money in various investments, much like a 401(k) , and are directly linked to the stock market's performance.
The payouts from variable annuities fluctuate depending on how much money you pay, the rate of return on your investments, and any expenses of those investments as well as the annuity. Although you'll be at more risk of losing your money, variable annuities offer a greater return potential.
You can divvy up your premium in multiple subaccounts to invest in different sectors of the market. Variable annuity funds can be invested in assets like stocks , bonds, mutual funds, money market funds, and more.
Variable annuities are regulated by the Securities and Exchange Commission (SEC).
Indexed annuities
Index annuities provide the positive investment potential that variable annuities offer. The return of an index annuity is based on a stock market index, like the S&P 500 . Like fixed annuities, these are regulated by state insurance commissioners.
Just like with a variable annuity, indexed annuities often have complex and hefty fees, such as surrender fees (also referred to as surrender charges). Surrender fees are imposed on policyholders if they cancel.
Payouts: Immediate annuities vs. deferred annuities
You can choose to buy an annuity that makes deferred payouts at some point in the future, or one that makes immediate payouts.
Immediate annuities
Also known as a single premium immediate annuity (SPIA), this option has payouts ready to start in as short as a month. It is typically purchased as a one-time lump sum. The insurance company then calculates the amount due to you based on your age, prevailing interest rates, and how long the payouts are expected to continue.
It's your call if you want an income stream for a limited period or a lifetime, and if you want monthly, quarterly, or yearly payouts. In general, the amount you receive for the whole period of your contract is fixed and guaranteed.
Deferred annuities
The deferred payment annuity option, as the name implies, delays the payouts until a future date. You can buy a deferred plan with a one-time payment or add to your funds periodically. After a length of time of your choosing — usually several years — you elect for payouts to begin. The tax situation is more complicated, but basically, your principal — the money you initially invested — gets returned to you free of taxes. You'll only owe the IRS on the earnings your annuity made during the deferred period.
Tax treatment of annuities
One of the best perks of investing in annuities is how it is taxed. "Annuities complement other retirement plans in that they provide opportunities to grow without heavy taxation," says Rob Williams, managing director of financial planning, retirement income, and wealth management at Charles Schwab .
Annuities are tax-deferred, meaning you won't pay taxes on the initial contribution or the investment gains until you withdraw. Keep in mind, however, that if you decide to purchase your annuity with after-tax dollars, then you'll pay tax on the investment gains when you receive payouts.
Payouts are also subject to your regular income tax rate. If you're living in a high-tax state like California or New York, you may benefit from deferring some of your income and moving to a lower-tax or tax-free state to potentially pay less in income tax later on.
In addition to the premium payments you make, you'll likely face some fees as well. Annuity fees typically range between 1% and 3%. An annuity with fees on the higher end of that range may not be a solid investment as they can take a hefty chunk out of your earnings.
- Mortality and expense risk charge pays the annuity issuer for the risk it's taking on for offering the annuity. This charge equals a percentage of your annual account value, often around 1.25% annually
- Administrative fees are charged by the issuer to cover the cost of record keeping and managing your annuity. It can be charged as a flat annual fee or a percentage of your account value.
- Commission fees often contribute to an annuity's price and exist to pay the person who sold it to you. This may drive an annuity's price up. You can likely avoid annuity commissions by buying from a fee-only advisor, who is paid only by you, and, as a fiduciary , is required to act in your best interests.
- Fund expenses are the costs that come with the funds your annuity may invest in, like mutual funds.
- Additional feature fees come with optional features you can add onto your annuity, such as guaranteed minimum income benefit or long-term care insurance.
- Penalties apply if you withdraw from an annuity before you're 59 ½. The Internal Revenue Service will levy a 10% tax penalty on top of regular income taxes you owe for the withdrawal amount.
- Surrender charges apply to variable annuities when you sell or withdraw money during the annuity's surrender period, often six to eight years after buying the annuity. Early withdrawals may also trigger unexpected tax hits, making variable annuities better for long-term goals.
Annuities — Frequently asked questions (FAQs)
Annuities may be good investment options for retirees worried they'll spend their savings too quickly. While not an ideal investment product to build wealth, annuities do have the potential to accrue value when invested in securities like fixed-rate bonds or variable money market funds.
Younger individuals saving for retirement or paying down debt shouldn't buy an annuity, as annuities are better for older folks nearing retirement. Rather than purchasing an annuity, you can contribute a portion of your monthly income in tax-advantaged retirement savings accounts like 401(k)s and IRAs to benefit from compound interest and additional investment gains.
You may lose money in an annuity if you purchase a variable annuity. A variable annuity poses a higher risk than a fixed-rate annuity since it's more closely linked to the market. However, there is potential for greater returns with a variable annuity.
The monthly income you can expect from an annuity can vary depending on how much your premium was, the kind of annuity, if the funds were invested — including the amount of gains accumulated— and how many payments were predetermined. The amount you receive per month may also be affected by taxes and fees.
Who should buy an annuity?
Annuities are a great addition to your retirement savings plan if you're always maxing out your 401(k) contributions and if you can afford the fees. They provide steady income throughout your retirement, they grow tax-free (until you receive payouts), and your beneficiaries can benefit from the payouts, too.
Since annuities aren't free, however, be sure to weigh their costs against their promised benefits to determine whether it's the right choice for you.
Chat with a financial consultant or CFP about your individual financial situation to see if an annuity is the right choice for you.
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O n her first foreign trip as Vice President in June 2021, Kamala Harris was tasked with delivering a blunt message in Guatemala City. "I want to be clear to folks in this region who are thinking about making that dangerous trek to the United States-Mexico border: Do not come," she said at a press conference, pausing for effect. "Do not come."
Three years later, that sound bite may come to haunt Harris' nascent presidential campaign. Despite her warning, border crossings reached historic highs during the Biden Administration. Republican critics cast the episode as a symbol of Harris’s ineffective tenure as President Biden's "border czar," a misleading label they applied after she was charged with helming diplomatic efforts to address the root causes of migration from Central America to the U.S.
“Kamala had one job,” Nikki Haley told the crowd at the Republican National Convention in Milwaukee last week. “One job. And that was to fix the border. Now imagine her in charge of the entire country.”
Read More: How Trump Plans To Run Against Harris .
In fact, Harris was never put in charge of the border or immigration policy. Nor was she involved in overseeing law-enforcement efforts or guiding the federal response to the crisis . Her mandate was much narrower: to focus on examining and improving the underlying conditions in the Northern Triangle of Central America—El Salvador, Guatemala, and Honduras—which has been racked by decades of poverty, war, chronic violence, and political instability. The strategy relied on allocating billions for economic programs and stimulating private-sector investment in the region in hopes that these programs would ultimately lead fewer migrants to make the dangerous journey north.
It was the first high-profile assignment in Harris' tenure as Vice President, and it was an especially thankless one. At best, addressing the “push factors” that spur migration would lead to incremental improvements and take a generation to yield results. At worst, it would make Harris the face of the border crisis, one of the Biden administration's biggest political vulnerabilities. "To the extent that this was a useful assignment, she did reasonably well in getting the private sector to invest in Central America," says Muzaffar Chishti, a senior fellow at the nonpartisan Migration Policy Institute. "But it was an assignment that could not produce results anytime soon."
The so-called "root causes strategy" focused on improving economic and security conditions by creating jobs, combating corruption, improving human and labor rights, and reducing violence. Harris allocated funds for humanitarian relief from natural disasters, and directed more than 10 million COVID-19 vaccines to the Northern Triangle countries. She held bilateral meetings with the region's leaders, as well as meetings with NGOs, business executives and human rights advocates. She worked with the U.S. Justice Department to launch an Anti-Corruption task force focused on prosecuting corruption cases with ties to the region, as well as Anti-Migrant Smuggling task forces in Mexico and Guatemala.
Read More: A Guide to Kamala Harris's Views .
Most importantly, Harris spearheaded a public-private partnership that, as of March 2024, had secured commitments from major U.S. and multi-national companies to invest more than $5 billion in the region. The Vice President "put her name on the line with very serious senior CEOs and kind of created a brand appeal for Central America that didn't exist," says Ricardo Zúniga, who until recently served as the U.S. special envoy to Central America.
Harris also spent time in Washington communicating with regional leaders. One tangible result, according to two former U.S. officials, was that it gave the U.S. the standing and relationships to help prevent Guatemalan prosecutors from overturning the results of last year’s presidential election, which was won by anti-corruption outsider Bernardo Arévalo. While delayed, the ultimately peaceful transition of power avoided the political instability that Biden Administration officials feared could cause a spike in migration. The U.S. applied public pressure through sanctions and visa restrictions on officials they accused of undermining the democratic process, as well as behind the scenes. Harris's team was directly involved, especially her national security adviser Philip Gordon, who traveled to the region to push for a peaceful democratic transfer of power, according to the two former U.S. officials.
But the narrow mandate given to Harris ignored shifting migration patterns, experts say. The slow process of addressing the "push factors," or reasons that migrants leave their countries, says Chisthi, can't compete with the "pull factors"—the economic and safety incentives that draw people to the U.S. When Biden assumed office, officials thought Central America would continue to be the epicenter of migration pressure. "We were wrong," says Zuniga. After the initial surge, migration from the Northern Triangle largely stabilized. By December 2023, 54% of encounters at the southern border involved citizens of countries other than Mexico, Guatemala, El Salvador and Honduras, according to U.S. Customs and Border Protection data.
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Much of Harris’s work failed to break through back home. Instead, she became the target of Republican broadsides about the border crisis and was repeatedly criticized for not visiting the U.S.-Mexico border. "She's dealing with a narrative problem," says Zuniga. With immigration topping the list of Americans’ concerns, according to recent Gallup polls , an ongoing humanitarian crisis at the border, and political deadlock on immigration reform and funding, Harris emerged as the most visible scapegoat.
Read More: Who Could Be Kamala Harris' Running Mate?
As they shift their focus from Biden to Harris, it’s clear that Republicans plan to attack Harris’s role on immigration issues. "The border crisis is a Kamala Harris crisis,” former President Trump's running mate, Ohio Sen. JD Vance, declared at a July 22 rally. A recent National Republican Senatorial Committee memo outlining talking points calls her "the architect of [Biden's] biggest failure." In a post on Truth Social on July 23, Trump said her "incompetence gave us the WORST and MOST DANGEROUS Border anywhere in the World." Texas Gov. Greg Abbott, a Republican, said if Harris is elected, he will "need to triple the border wall, razor wire barriers and National Guard on the border.”
Harris has a broader record on immigration, including backing a bipartisan border-security deal aimed at reducing border crossings earlier this year. As a Senator, she was an outspoken advocate of legal protections for DACA recipients, made headlines for aggressively questioning Trump immigration officials, and derided the then-President's border wall as a "medieval vanity project.” But it’s clear the “border czar” label has become a political liability.
Some Harris allies have expressed frustration with Biden for putting her in this position. In doing so, he was repeating a familiar pattern—it was a portfolio Biden himself was given as Vice President. In 2014, when a surge in children and families from Central America overwhelmed the U.S. immigration system, then-President Barack Obama tasked him with leading the international response to the crisis. "The solution to this problem is to address the root causes of this immigration in the first place," Biden said on a trip to Guatemala City that summer. "Especially poverty, insecurity and the lack of the rule of law.”
Seven years later, little had changed when Harris gave the same speech, in the same place. Politically, "the problem is that no one cares about the root causes," says Chisthi. "It's too abstract. And frankly, very little can be done about them in the short run, while the public is focused on what is happening with the border today."
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4 takeaways from President Biden’s Oval Office address
![what does assignment of life insurance mean Domenico Montanaro - 2015](https://media.npr.org/assets/img/2015/03/24/domenico_montanaro_npr_007_sq-fa97229e6439b8253be5293978d8240d28dbe326.jpg?s=100&c=85&f=jpeg)
Domenico Montanaro
![what does assignment of life insurance mean President Biden speaks during an address to the nation about his decision to not seek reelection, in the Oval Office at the White House on Wednesday.](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/5593x3726+0+0/resize/1100/quality/50/format/jpeg/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2Fa1%2F7b%2Fea7f04b3441ba70a01897eb7ba78%2Fgettyimages-2162709040.jpg)
President Biden speaks during an address to the nation about his decision to not seek reelection in the Oval Office at the White House on Wednesday. Evan Vucci/Pool/AFP via Getty Images hide caption
For the latest on race for president, head to NPR's Election 2024 page.
It’s not often that a politician takes a step back.
They are often their own biggest champions. But in rare cases, when the writing is on the wall, because of age, health — or politics, they do.
In an address to the nation from the Oval Office Wednesday night, President Biden said he will serve out his term as president, noting there are still things he wants to accomplish. But he explained that he is not seeking reelection, in part, because he wants to “pass the torch to a new generation.”
Here are four takeaways from what Biden had to say:
1. Biden tried to send the message that no one person is bigger than the country — and that what America stands for is at stake.
“Nothing can come in the way of saving our democracy,” Biden said. “That includes personal ambition.”
It was a remarkable statement for Biden, 81, who has held public office for more than half a century and ran for president multiple times — unsuccessfully until Donald Trump came along — and was ushered into office at 78 years old, the oldest person ever to be elected president.
![what does assignment of life insurance mean President Biden during a campaign event in Detroit on July 12, 2024.](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/2667x2667+918+0/resize/100/quality/85/format/jpeg/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2Ffe%2F6b%2F33ed1075471fbc25a67ad09d686c%2Fgettyimages-2161175723-1.jpg)
Biden's brand was overcoming obstacles. But this one, he couldn't beat
Biden invoked past presidents — Abraham Lincoln, he said, urged Americans to “reject malice;” Franklin Delano Roosevelt implored the country to “reject fear.” He cited George Washington, who, by stepping aside after two terms despite his popularity, “showed us presidents are not kings.”
“I revere this office,” Biden said, “but I love my country more. It's been the honor of my life to serve as your president, but in the defense of democracy, which is at stake, I think it's more important than any title.”
In other words, Vice President Harris gives those who see former President Trump as an existential threat to that democracy the best chance to win because of Biden’s diminished capabilities to prosecute the case against him.
It's a case that Biden sees as necessary for someone to make effectively, considering Trump's unwillingness to accept the results of the 2020 election and his refusal to agree to accept the results of the upcoming election.
![what does assignment of life insurance mean President Biden is seen speaking to supporters at a campaign event at Renaissance High School on July 12 in Detroit. On Sunday, Biden said he would no longer seek reelection and instead is endorsing Vice President Harris.](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/683x683+171+0/resize/100/quality/85/format/jpeg/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2Fa4%2F92%2F936ced554250b0ae32c951e08cd3%2Fgettyimages-2161175423.jpg)
6 political takeaways from Biden's decision to step aside
In Washington’s farewell address on Sept. 19, 1796, he also warned that “cunning, ambitious, and unprincipled men will be enabled to subvert the power of the people and to usurp for themselves the reins of government, destroying afterwards the very engines which have lifted them to unjust dominion.”
“The great thing about America is,” Biden said, “here, kings and dictators do not rule; the people do.”
Biden and others see that foundational American principle as lost on someone like Trump, who, when he visited Mount Vernon, Washington’s estate in Virginia, in 2019 with French President Emmanuel Macron, said of the nation’s first president, per Politico :
“If he was smart, he would’ve put his name on it. You’ve got to put your name on stuff or no one remembers you.”
2. Biden desperately wants to be seen as a uniter, but that’s been a struggle for him as president — and maybe one of his biggest personal disappointments.
![what does assignment of life insurance mean President Joe Biden pauses before he addresses the nation from the Oval Office of the White House in Washington, Wednesday about his decision to drop his Democratic presidential reelection bid.](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/5615x3748+0+0/resize/1100/quality/50/format/jpeg/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2Fcf%2Faa%2F8bc12d6543369c6d63a05f46e445%2Fap24207024251384.jpg)
President Joe Biden pauses before he addresses the nation from the Oval Office of the White House in Washington on Wednesday about his decision to drop his Democratic presidential reelection bid. Evan Vucci/Pool/via AP hide caption
The president cited the need for unity among Americans multiple times:
“America is going to have to choose between moving forward or backward, between hope and hate, between unity and division.” “In this moment, we can see those we disagree with not as enemies, but as fellow Americans.” “The sacred cause of this country is larger than any one of us, and those of us who cherish that cause … a cause of American democracy itself, [we] must unite to protect it.” “So I've decided the best way forward is to pass the torch to a new generation. That's the best way to unite our nation.” “Let's act together, preserve our democracy.”
The idea of uniting the country is something Biden ran on in 2020. But it hasn’t worked out that way. He’s been sharply criticized by the right and views of him — in this hyperpolarized environment where people get their information largely from sources that reinforce their previously held beliefs — are as partisan as any president before him, including Trump.
Just 43% said they had a favorable view of Biden, according to an NPR/PBS News/Marist poll taken before the debate between him and Trump. That included just 38% of independents and only 10% of Republicans.
3. This is the start of a review of Biden’s legacy — and that views of it may take a long time to set in.
Biden defended his legacy and laid out what he believes he’s accomplished and what he still hopes to do.
“I believe my record as president, my leadership in the world, my vision for America's future, all merited a second term,” he said, “but nothing, nothing can come in the way of saving our democracy. That includes personal ambition.”
![what does assignment of life insurance mean Bar chart: If November’s presidential election were held today, whom would you support? Donald Trump: 46%. Kamala Harris: 45%. Undecided: 9%.](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/2702x2700+1030+0/resize/100/quality/85/format/png/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2Fc9%2F4d%2F8ea737e745a5a49e1aa96bf8cd31%2Fartboard-1-3x.png)
Poll: Presidential race hits a reset with Harris vs. Trump
The latest NPR poll , taken this week after Biden said he would not continue to run for reelection, tested what people think of his presidency. It showed most, right now, are unimpressed.
Despite the record of legislative accomplishments Biden cited, only slightly more than a quarter of respondents said he would be remembered as an above average president or one of the best presidents in U.S. history. Half said he would be remembered as below average or one of the worst.
Those views can change with time, especially when a president is no longer in the political arena. President Obama’s favorability, for example, has improved since leaving office and views of his signature legislative achievement, the Affordable Care Act, have hit record highs.
A 2022 survey of historians found Biden rated as the 19th best president of the 46 that have served. Trump was in the bottom five at No. 43. But, at this point, Americans overall, feel differently.
4. After seeing Harris for a few days, the contrast with Biden is clear.
![what does assignment of life insurance mean Democratic presidential candidate and Vice President Harris speaks to supporters during a campaign rally at West Allis Central High School on Tuesday in West Allis, Wis.](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/1024x683+0+0/resize/1100/quality/50/format/jpeg/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2F0c%2F9a%2Fd8216dfb466787181ea1599efab8%2Fgettyimages-2162559906.jpg)
Vice President Harris speaks to supporters during a campaign rally at West Allis Central High School on Tuesday in West Allis, Wis. Jim Vondruska/Getty Images hide caption
Biden could have made the determination years ago, after saying he would be a “transitional” president during the 2020 election, that he would not run for reelection.
But the realities of his personal limitations after his dismal debate performance last month, and how his political support had cratered in swing states led to this moment.
![what does assignment of life insurance mean Vice President Kamala Harris speaks from the South Lawn of the White House in Washington on Monday during an event with NCAA college athletes.](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/3753x3753+937+0/resize/100/quality/85/format/jpeg/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2F4a%2Fb8%2F7c576f0d43e0adc1d6867783ed6e%2Fap24204575794832.jpg)
Biden had a problem with young voters. Can Harris overcome it?
![what does assignment of life insurance mean Republican Presidential nominee, former President Donald Trump speaks to attendees during his campaign rally in Charlotte Wednesday. The rally is the former president's first since President Joe Biden announced he would be ending his reelection bid.](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/5504x5504+1376+0/resize/100/quality/85/format/jpeg/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2Fd4%2F19%2Fb2f834b74aea8da11d4ad3439e36%2Ftrump-charlotte-gettyimages-2163528238.jpg)
Trump tries out attack lines on Kamala Harris as her campaign heats up
For years now, Democrats have been holding their breath with every public appearance he made. They crossed their fingers that he would acquit himself at least decently well, but they knew one bad speech, interview or… debate… could sink his — and their party’s — chances to hold onto the White House.
After watching Harris' first couple of days of campaigning, from her first speech before staffers to her first official campaign rally in Wisconsin, Democrats have been breathing a bit easier.
She has spoken clearly and coherently, and there has been energy from the grassroots. Whether that lasts or if it resonates with swing voters is still to be decided.
Biden didn’t explicitly lay out Wednesday night why he stepped aside, but watching what was an, at times, halting address, the contrast was like night and day.
It was very much a moment in history with a president, who appeared in many ways, to be delivering something of his own farewell. He was recognizing he cannot be as effective a campaigner as he would have liked, so he is taking a step back from the public eye, handing over the reins of the campaign to his vice president for the next 103 critical days in American democracy.
- election 2024
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COMMENTS
Katharine Beer. A collateral assignment of life insurance is a conditional assignment appointing a lender as an assignee of a policy. Essentially, the lender has a claim to some or all of the ...
With collateral assignment of life insurance, ownership of an asset transfers from the borrower to the lender. This transfer only remains in place until the loan is paid in full. In this situation, the transferred asset is your life insurance policy. The goal is only to satisfy your loan obligation. Once that debt is repaid, you'll end the ...
Collateral assignment of life insurance is an arrangement where you agree to give a lender the first claim to the payout from your life insurance policy. This allows your life insurance to serve as the collateral that many loans — especially small business loans or Small Business Administration (SBA) loans — require before they can lend you money you need.
A collateral assignment of life insurance is a method of securing a loan by using a life insurance policy as collateral. If you pass away before the loan is repaid, the lender can collect the ...
Collateral assignment of life insurance is an arrangement where a policyholder uses the face value of their life insurance policy, which can be a term or permanent life insurance policy, as collateral to secure a loan. If the policyholder dies before they pay off the loan, the lender is prioritized to receive a portion of the death benefit ...
A life insurance assignment is a document that allows you to transfer the ownership rights of your policy to a third party, transferring to that third party all rights of ownership under your ...
In a collateral assignment of life insurance, you use a life insurance policy to secure a loan. You first set up coverage as usual by applying for and buying some type of life insurance policy with a death benefit. If you already have a policy, you could use that too. Then you fill out a collateral assignment form with the lender.
A collateral assignment is a process by which a person uses their life insurance policy as collateral for a secured loan. In simple terms, collateral assignment is reassigning priorities for who gets paid the death benefit of your life insurance policy.
Permanent insurance: Permanent insurance, such as universal and whole life insurance, is lifelong insurance coverage that contains a cash value.If you default on the loan, lenders can surrender your policy and use that cash value to pay down the balance. If you die, the lender has a right to the death benefit, up to the amount you still owe.
A collateral assignment for your life insurance coverage only allows the bank or lender to claim the amount of money still owed on an outstanding loan or debt. If you have a $500,000 life insurance policy and die while still owing $50,000 on a business loan, the lender could claim $50,000 of your death benefit — assuming, of course, that you ...
Assignment of a Life Insurance Policy simply means transfer of rights from one person to another. The policyholder can transfer the rights of his insurance policy to another for various reasons and this process is called Assignment. The person who assigns the policy, i.e. transfers the rights, is called the Assignor and the one to whom the ...
Definition. What is an assignment of a life insurance policy? Jim currently has a whole life insurance policy that pays $1,000,000 on his death and the premiums are fully paid up. An assignment is ...
Collateral assignment of life insurance allows you to use your life insurance policy as collateral when applying for loans. This is especially common when applying for business loans. However, your insurer must allow this arrangement, and the policy must be sufficient to cover the collateral requirements. Using your life insurance policy comes ...
There are two parties to a collateral assignment. Assignor - Is the owner of the life insurance policy. Assignee - Is the lender. Life insurance companies have standardized forms used for this purpose. The owner completes the form and sends it to the lender for review and signature. Once completed by the lender, the form is sent to the ...
The process of transferring rights of a Life Insurance Policy is called Assignment. There are 2 types of Assignment. Absolute Assignment. Conditional Assignment. Absolute Assignment means complete Transfer of Rights. The person who transfers the rights is called the Assignor and the person to whom the rights are being transferred is called the ...
Collateral assignment of life insurance is a common requirement for business loans, and lenders may require you to get a life insurance policy to be used for collateral assignment. 4 min to read. Explore Progressive's editorial standards for Answers articles to find out why you can trust the insurance information you find here.
Life insurance is a protection against financial loss that would result from the premature death of an insured. The named beneficiary receives the proceeds and is thereby safeguarded from the ...
You can freely assign your life insurance policy unless some limitation is specified in your contract (your insurance company can furnish the required assignment forms). Through an assignment, you can transfer your rights to all or a portion of the policy proceeds to an assignee. The extent to which these rights are transferable depends on the ...
Definition of Assignee. An assignee on a life insurance policy is an individual or entity that is designated to receive the policy benefits or take over the ownership rights and responsibilities. When a policyholder assigns their life insurance policy, they transfer their rights to the assignee, who then becomes the new owner of the policy.
3. Fill out a collateral assignment form. Once you sign your life insurance contract and pay your first premiums, complete a collateral assignment form with your insurer. You'll fill out your lender's contact details so your insurer can designate them as a collateral assignee while your loan is outstanding. 4.
An absolute assignment on a life insurance policy transfers the policy's ownership rights to another party. Reasons for making an absolute assignment include financing a charitable gift and ...
In insurance the assignment means assignment of rights under the contract. An assignee for all purposes becomes the owner of the policy and enjoys all rights thereunder. However, by assignment no change is made in the subject matter insured by the policy and it remains unaltered.".
This differs from collateral assignment since instead of using the loan as collateral, you are signing the full policy over to a person or entity. This person or business is considered the assignee, while the person who is selling the policy is the assignor. The individual who buys the insurance policy gains ownership of the policy.
Indexed universal life insurance can help you build wealth and leave a death benefit to your loved ones. However, higher returns are not guaranteed. ... This means $200 is added to the cash value ...
The Assignment with Audie Cornish Every Monday on The Assignment, host Audie Cornish explores the animating forces of American politics. It's not about the horserace, it's about the larger ...
Annuities are long-term investments issued by insurance companies. They can provide a steady stream of income for the rest of your life after retirement. Start inventing today.
The LTCG tax rate on property sales has decreased from 20% to 12.5%, but the indexation benefit has been eliminated. Previously, this benefit allowed the adjustment of purchase prices to account ...
Quality of life was a focus of Doherty's in her final months. "I'm not the person who likes to give up very easily," she said in June. "I just don't want my sickness to last that long."
It was the first high-profile assignment in Harris' tenure as Vice President, and it was an especially thankless one. At best, addressing the "push factors" that spur migration would lead to ...
Here are four takeaways from what Biden had to say: 1. Biden tried to send the message that no one person is bigger than the country — and that what America stands for is at stake.