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Updated on October 4, 2023

An assignor in insurance refers to the policyholder or owner of an insurance policy who transfers or assigns the rights, benefits, or ownership of the policy to another party, known as the assignee. This assignment can be partial or complete, and it involves legally relinquishing control over the insurance policy to someone else. The assignor retains certain rights as specified by the terms of the assignment.

What are the types of Assignors?

Absolute Assignment – In an absolute assignment, the policy’s full ownership and control are transferred from the assignor to the assignee, who becomes the new policyholder with authority over beneficiary changes and policy values.

Collateral Assignment – In a collateral assignment, the policyholder assigns the policy to a lender as loan collateral. The lender has a claim on the policy’s proceeds solely to cover the outstanding loan amount, and upon loan repayment, policy ownership returns to the policyholder.

What are the reasons for assigning an insurance policy?

The possible reasons for assigning an insurance policy are explained here,

Estate Planning – Assigning an insurance policy is often done as part of estate planning to facilitate the seamless transfer of policy benefits to a chosen beneficiary, typically a family member, upon the policyholder’s passing.

Collateral for Loans – Some individuals assign their insurance policies as collateral for loans, providing lenders with a form of security. This allows lenders to claim the policy’s proceeds in the event of a loan default.

Transfer of Ownership – Policies can also be assigned to transfer ownership, such as when a business owner assigns a key person insurance policy to their company to ensure the business receives the policy payout if the insured key employee passes away.