Collateral assignment of life insurance
Advertiser disclosure.
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Our content is backed by Coverage.com, LLC, a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed . Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
- Share this article on Facebook Facebook
- Share this article on Twitter Twitter
- Share this article on LinkedIn Linkedin
- Share this article via email Email
At Bankrate, we take the accuracy of our content seriously.
“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced.
Their reviews hold us accountable for publishing high-quality and trustworthy content.
- • Auto insurance
- • Life insurance
- Connect with Mary Van Keuren on LinkedIn Linkedin
- Get in contact with Mary Van Keuren via Email Email
- Connect with Natasha Cornelius, CLU on LinkedIn Linkedin
The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here's an explanation for how we make money . This content is powered by HomeInsurance.com (NPN: 8781838). For more information, please see our Insurance Disclosure .
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy , so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts , who ensure everything we publish is objective, accurate and trustworthy.
Our banking reporters and editors focus on the points consumers care about most — the best banks, latest rates, different types of accounts, money-saving tips and more — so you can feel confident as you’re managing your money.
Editorial integrity
Bankrate follows a strict editorial policy , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service.
Insurance Disclosure
This content is powered by HomeInsurance.com, a licensed insurance producer (NPN: 8781838) and a corporate affiliate of Bankrate.com. HomeInsurance.com LLC services are only available in states where it is licensed and insurance coverage through HomeInsurance.com may not be available in all states. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
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.
Related Articles
What is collateral insurance and how does it work?
What does life insurance cover?
What is an irrevocable beneficiary?
Life insurance death benefits
IMAGES
VIDEO
COMMENTS
SVC-130-PLA Assignment of Policy as Collateral Security - page 1 of 3 05/2019 ... Protective Life and Annuity Insurance Company Life and Health Insurance Administration P.O. Box 12687 Birmingham, AL 35202-6687 ... this form should be signed by an officer other than the insured. The title(s) of the officer(s) signing the form should also be ...
Protective and Protective Life refer to Protective Life Insurance Company (PLICO) and its affiliates, including Protective Life and Annuity Insurance Company (PLAIC). PLICO, founded in 1907, is located in Nashville, TN, and is licensed in all states excluding New York. PLAIC is located in Birmingham, AL, and is licensed in New York.
assignment shall continue on the plan. 4. the Insurance Company, and to receive all benefits and advantages derived from such options. B. and excluded from this assignment and do not pass to the Assignee: 1. reduce the amount of insurance; 2. The right to designate and change the beneficiary; 3. The right to elect optional modes of settlement ...
Page 1 of 3 Partial Assignment of Policy as Collateral Security Protective Life Insurance Company Life and Health Insurance Administration P.O. Box 12687 Birmingham, AL 35202 -6687 ... signing this form. This is for the protection of both parties. 3. If the Policy is owned by a partnership, association or company, this form should be signed by ...
This assignment is made and the policy is to be held as collateral security for all indebtedness of the undersigned Insured (or the undersigned Owner if the Insured is not the owner of the policy) to the Assignee due or to become due or that may hereafter be contracted, and any balance that may remain with the Assignee after payment of such ...
1. Complete the Assignment/Transfer of Ownership Section 1035 form. 2. Obtain the necessary signatures. 3. Keep a copy for your records and provide the applicant with a copy. 4. The original form must be mailed to Protective Life Insurance Company: Mailing Address: Protective Life Insurance Company P.O. Box 830619 Birmingham, AL 35283
PROTECTIVE LIFE INSURANCE COMPANY expresses no opinion as to the suitability of assignment of insurance proceeds or the purposes for which this form is or may be used by the parties to the assignment, and the Company shall have no responsibility to any owner, insured or beneficiary in connection with honoring or giving effect to the
The Protective Life Insurance Company shall not be deemed to have knowledge of this partial assignment of policy as collateral security until it has been filed at the Home Office of the Company in accordance with the terms of the Assignment Clause in the policy. The Company assumes no responsibility as to the validity or legality of any assignment.
Protective Life Insurance Company COLLATERAL ASSIGNMENT OF GROUP INSURANCE Name of Insured: Term Life Plan Group Policy Number: 104TLP Certificate # Name of Group: AMERICAN DENTAL ASSOCIATION ADA #: ... purposes for which this form is or may be used by the parties to the assignment, and the Company shall have no responsibility ...
Form 10481) and to designate the proposed assignee as the new rightsholder under section 2 thereof. COLLATERAL ASSIGNMENT - A collateral assignment is described as a conditional assignment (or temporary transfer) of the policy or contract. Most frequently, a collateral assignment is made to a bank or other lender to provide security for a ...
PL-405RFL. Confidential Financial Statement. To be signed by the Proposed Insured if Face Amount is $5,000,001 or greater (for Proposed Insured(s) age 0-70) and $3,000,001 or greater (for Proposed Insured(s) age 71 and older) or at the discretion of underwriting. PL-402-FL.
protective.com Split-Dollar Life Insurance—Collateral Assignment Method 3 Loan Regime/Collateral Assignment… • The loan regime generally applies to a collateral assignment arrangement when: (a) the payment is made directly or indirectly by the non-owner to the owner; (b) the payment is either a loan under
Protective Life SVC-128-PLA 05/2023 and Annuity Insurance Company Life and Health Insurance Administration P.O. Box 12687 Birmingham, AL 35202-6687 Policy No: Insured: Owner: PARTIAL ASSIGNMENT OF POLICY AS COLLATERAL SECURITY . For value received, and as security for the indebtedness hereinafter mentioned, the undersigned hereby sell,
Collateral Assignment Form. Use this form to collaterally assign the policy(ies) referenced below. This form must be completed and signed by the Owner. MI Last Sufix. "Company" as referred to herein, is Massachusetts Mutual Life Insurance Company, and/or MML Bay State Life Insurance Com-pany and/or C.M. Life Insurance Company.
PROTECTIVE LIFE INSURANCE COMPANY assumes no responsibility for the validity or legality of the foregoing assignment. PROTECTIVE LIFE INSURANCE COMPANY By: _____ Title: _____ INSTRUCTIONS FOR COMPLETING FORMS ASSIGNMENT OF COMMISSIONS 1. The contract which is to be assigned should be noted in the space provided. Separate forms must be completed ...
Call toll-free in the United States: 800-531-8722. Step 3 - USAA will Record the Assignment. After our records are updated, we will provide the Assignor and the Assignee each with a copy of the recorded assignment forms for their records. DO NOT RETURN THIS PAGE INSTRUCTIONS ONLY. 39470-1023.
Assignment of Life Insurance Policy or Annuity Contract as Collateral Security. Life and Annuity Operations: PO Box 21008, Greensboro, NC 27420-1008 Phone: 800-487-1485 Fax: 800-819-1987 Email: [email protected]. Annuity Service Ofice: PO Box 2348, Fort Wayne, IN 46801-2348 LincolnFinancial.com. Policy / Contract No.:
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 ...
SVC-130-PL Assignment of Policy as Collateral Security - page 1 of 3 08/2016 ... The Protective Life Insurance Company shall not be deemed to have knowledge of this assignment until it has ... this form should be signed by an officer other than the insured. The title(s) of the officer(s) signing the form should also be included. If there is ...
1. The right to collect from United of Omaha any disability benefit payable in cash that does not reduce the amount of insurance. 2. The right to designate and change the beneficiary. 3. The right to elect any optional mode of settlement permitted by the Policy or allowed by United of Omaha.
Talk with an Insurance Plan Specialist at 866-607-5338 for assistance (weekdays from 8 a.m. to 6 p.m. Central Time) or Email [email protected] . WEB.2458697.01.23. With the ADA-sponsored Insurance Plans, you're assured personal attention to your insurance needs.
For value received, I hereby assign and transfer to Protective Life Insurance Company ("Protective Life") all right, title, and interest to the above listed policy(ies) in an exchange intended to qualify under Section 1035 of the Internal Revenue Code. However, this assignment and all other terms and agreements set forth below are ...
Collateral assignment of life insurance leverages your life insurance as loan collateral. Find out how it works and what's required. ... Once your first life insurance premium is paid, you can proceed with completing a collateral assignment form via your insurer. On the form, you'll need to provide your lender's contact information so they can ...