Glossary

Assignment

A written transfer of some or all rights in a life insurance policy to another person or entity, either permanently or as collateral for a loan.

Also called: policy assignment, absolute assignment

An assignment transfers rights under a life insurance policy from the owner to someone else. There are two main kinds. An absolute assignment hands over ownership entirely: the new owner can change beneficiaries, borrow against the cash value or surrender the policy. A collateral assignment of life insurance is temporary and partial: it gives a lender a claim on the death benefit or cash value up to the amount owed, and the rights return to the owner when the debt is repaid.

Assignments are made on the insurer's form and generally bind the insurer only after it receives and records them. Hypothetical example: a business owner takes out a $250,000 SBA loan and collaterally assigns a $500,000 term policy to the bank. If the owner dies with $180,000 still owed, the bank receives $180,000 and the named beneficiaries receive the remaining $320,000.

An absolute assignment can carry tax consequences: a possible taxable gift, and if the policy is transferred for value, loss of part of the death benefit's income-tax exclusion. A transfer within three years of death can still pull the proceeds back into the original owner's estate. If an irrevocable beneficiary is named, that person usually must consent. See transferring ownership of a life insurance policy and assigning life insurance to a funeral home.

Last reviewed October 4, 2026

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Related terms

Policy owner The person or entity that controls a life insurance contract: it names beneficiaries, pays premiums and can borrow against, assign or surrender it. Beneficiary The person, trust, charity or estate named to receive a life insurance death benefit or an annuity's remaining value when the insured or owner dies. Irrevocable beneficiary designation A beneficiary choice the policy owner can't change or undo without that beneficiary's written consent, giving the beneficiary a vested interest. Policy loan Money borrowed from an insurer using a permanent policy's cash value as collateral, with no credit check and no required repayment schedule. Payor The person or entity that pays a policy's premiums, who may be someone other than the owner, the insured or the beneficiary.

Related guides

Burial insurance vs final expense vs preneed Burial and final expense insurance are the same small life policy; preneed is a prepaid funeral contract. How each works and what happens if plans change. Collateral assignment of life insurance How pledging a life insurance policy to a lender works, what the lender can collect, how it affects your beneficiaries, and how to release it. Assigning life insurance to a funeral home A funeral home assignment directs part of a death benefit to the funeral bill. How it works, what to check before you sign, and alternatives if a claim is slow. How to cancel a life insurance policy, and when not to How to cancel term or permanent coverage, what you get back, the fee and tax traps, and when keeping or changing the policy beats canceling. Insurable interest: who can buy life insurance on whom Insurable interest is the family or financial tie that lets you insure someone else's life. Who qualifies, when it must exist, and the consent rule. Irrevocable beneficiaries What an irrevocable beneficiary is, what the owner can no longer do without consent, when divorce or a loan makes one necessary, and how to remove one.

Related insurers

National Guardian Life (NGL) Madison, Wisconsin preneed funeral insurance specialist sold through funeral homes; policyholder-owned through a mutual holding company since January 2026.