Texas General Lines — Life, Accident, Health and HMOLife InsuranceEasy
Which of the following statements is TRUE regarding the 'Assignment' provision in a life insurance policy?
- AIt guarantees that the policy will not lapse for a specified period due to non-payment of premiums.
- BIt provides for an automatic increase in the death benefit at certain ages.
- CIt allows the policyowner to change the beneficiary without the insurer's consent.
- DIt permits the policyowner to transfer ownership rights of the policy to another party.
Show answer & explanationAnswer & explanation
Correct answer: D. It permits the policyowner to transfer ownership rights of the policy to another party.
The Assignment provision in a life insurance policy allows the policyowner to transfer some or all of their ownership rights to another party. This can be done as a collateral assignment (to secure a loan) or an absolute assignment (permanent transfer of all rights).
Why the other options are wrong
- A. This describes the Grace Period or Automatic Premium Loan provision.
- B. This describes a Guaranteed Insurability Rider or a COLA rider, not assignment.
- C. This describes changing a beneficiary, which is a separate policy right, not assignment.
Assignment Provision
A life insurance policy provision that allows the policyowner to transfer some or all of their ownership rights to another individual or entity.
- Transfer of ownership rights.
- Can be collateral (temporary) or absolute (permanent).
- Requires written notification to insurer.
Memory trick: Assignment: Assign your rights, transfer your mights.