In the life insurance industry, assignment refers to the transfer of ownership of a life insurance policy from the policyholder to another party, such as a creditor, a family member, or a business partner. The process of assignment allows policyholders to assign their rights and benefits under the policy to a third party, typically in exchange for some form of consideration.

Types of Assignment

There are two main types of assignment in the life insurance industry: absolute assignment and collateral assignment.

Absolute assignment is the complete transfer of ownership of a life insurance policy to another party. The assignee becomes the new owner of the policy and assumes all the rights and obligations associated with the policy. Absolute assignment is typically used in cases where the policyholder wants to permanently transfer ownership of the policy, such as when gifting the policy to a family member or selling the policy to a third party.

Collateral assignment, on the other hand, is a partial transfer of ownership of a life insurance policy. In a collateral assignment, the policyholder assigns a portion of the policy’s benefits to a third party, such as a creditor, as collateral for a loan or debt. The assignee does not become the owner of the policy, but rather has a right to the policy’s benefits only to the extent necessary to satisfy the debt.

Process of Assignment

To assign a life insurance policy, the policyholder must first obtain the necessary forms from the insurance company. The forms typically require the policyholder to provide the name of the assignee, the type of assignment (absolute or collateral), and the percentage of the policy’s benefits to be assigned.

Once the forms are completed and signed by both the policyholder and the assignee, they must be submitted to the insurance company for processing. The insurance company will then update its records to reflect the new ownership of the policy, and the assignee will receive a copy of the assignment agreement.


Assignment is an important tool in the life insurance industry that allows policyholders to transfer ownership of their policies to other parties. Whether it is an absolute assignment or a collateral assignment, the process of assignment involves a legal transfer of rights and benefits from the policyholder to the assignee. It is important for policyholders to understand the implications of assigning their policies, and to consult with a qualified insurance professional before making any decisions.

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Avatar photo About the author: David Krug is the CEO/President of PolicyPeak, a modern and tech-driven life insurance company. David noticed a gap in the market for personalized policies at an affordable price. He founded PolicyPeak in 2022 with the goal of simplifying the buying process for consumers and offering policies tailored to their unique needs.