What Is An Absolute Assignment Of Life Insurance? 2 Helpful Uses Of Absolute Assignment Insurance!

What is an absolute assignment of life insurance? Absolute assignment, by definition, is the act of transferring the ownership of an insurance policy without having any more terms and conditions. For example, it is not unusual to have emergencies in life wherein you need to use a lump of money. Well, having insurance could help you with that one. But did you know you could also use your life insurance as collateral for applying for a loan?

That is where an absolute assignment is needed to be signed. You probably haven’t heard of this one yet, but it is stated in your policy’s terms and conditions. This article will talk about what an absolute assignment means, its uses, and how it works. So, let’s get it right on.

what is an absolute assignment of life insurance


What Absolute Assignment Of Life Insurance Is

To learn what is an absolute assignment of life insurance, you have to be familiar with the term “absolute assignment” first. You may have or haven’t read the term “absolute assignment” in your insurance policy, but it refers to the transfer of the policy’s ownership should you change it. Numerous instances where you may want to change the owner of your insurance policy for some reason. So, where do you think you use this for?


Absolute assignment uses

Having an insurance policy is quite an advantage over those who don’t. Your beneficiary could get a reimbursement when you die, saving them from a future financial crisis when you’re gone. Knowing how you should use your insurance policy is what I strongly suggest. You should also know what an absolute assignment of life insurance is and what you should use it for.


Use #1. Collateral for a bank loan

One of the uses of life insurance is to use it as collateral when you apply for a loan in the bank. Some banks may be concerned if you could repay the loan while you’re still living, so they could require you to sign an absolute assignment until the loan is paid. The bank will be the beneficiary of your life insurance reimbursement until the load is fully paid.

In any circumstance that you pass away while still paying your loan, the bank will deduct the loan balance and give the remaining amount to your beneficiary.


Use #2. Charity gift

This is most popular with elders who have no blood relatives to receive the reimbursement when they die. It has been gaining popularity nowadays. Life insurance is often purchased to provide a charitable donation to a Charity. However, the insurance company will reimburse the estate with delays and probable deductions from incurring processing fees. The use of absolute assignment in this cause could make the estate the beneficiary of the insurance policy.


How the transfer works

Since absolute assignment will transfer the whole ownership and rights to the other party, even if the owner is to the other party, you can remain insured unless the new owner is the beneficiary and make decisions about the investments. Even if the owner is now with the other party, you are still responsible for paying the said life insurance policy premiums. Failing to do so, you could face legal consequences.


Procedure #1. Legal considerations

If you decide to transfer the policy’s ownership, you will have to inquire to your insurance provider first if they allow the transfer. If they do, they will give you an assignment form to be filled out.

Make sure to complete everything before submitting it to your insurer. The insurance company will get a copy of the complete form and process your request. The insured must endorse the policy document or fill up the form with the assigned party’s name.

Some documents that the insurance company will require you include proof of income, a copy of a photo ID with the address indicated, and a copy of a PAN card. The requirements in absolute assignment may differ depending on the insurance company.


Procedure #2. Acceptance and rejection

The insurance company will record the filing of the assignment and notify the assignor together with the payment of certain fees. However, the insurer will have the right to reject if the insurer believes that the assignor is against the policy holder’s interest. Learn more of this in this article: Absolute assignment of a life insurance policy.


Sample Situation

Let’s say Marvin owns a life insurance policy where he has 1 million dollars, and he would like to give it to the orphanage where he grew up. So to make this happen, Marvin will have to sign an absolute assignment of the policy. So if Marvin dies, the death benefits and proceeds will be given to the said orphanage. However, However, Marvin’s family will have nothing to do with the money since he signed the absolute assignment.

After completing the assignment form and turning it into the insurance company, the policy owner is the orphanage upon execution of the absolute assignment. If the orphanage wishes to transfer it to another entity without any reason, the absolute assignment will is applied.



It is important to know the terms in your insurance policy and what is an absolute assignment of life insurance. You may need to use these terms in the future if you ever decide to do something with your life insurance. On that note, always be sure that whomever you decide to transfer your life insurance to can be trusted, even if it is as collateral to a loan or as a gift to an institute.

Regardless, insurance policy is not only limited to health or personal use. You can also avail yourself of insurance for your property. Here is one topic that will talk about how water damage insurance work. If you have time, you can read this one and learn more!

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