If you stumbled across this article it’s probably because you are curious of what Collateral Assignment of life Insurance means or you are looking for a way to secure a loan but you probably don’t have a good credit rating to do so. Don’t worry we are here to help! If you found yourself in a position of no other option for securing a loan then you should consider the assignment of life insurance policy as collateral for a loan. In this article, we will be explaining collateral assignment of life insurance in detail, the types of life insurance policies that work for a collateral assignment, the process of obtaining a collateral assignment, and how to find companies that allow collateral assignment. The following are some key points from the article;

1. Did you know your life insurance policy can help you obtain a loan? Many lenders accept life insurance as collateral because of the guaranteed funds. Basically, they accept life insurance as collateral because if the insured passes away the lenders would still be getting their money back. 
2. Some collateral assignments involve the cash value of existing permanent life insurance policies. Since they look for cash value some lenders won’t accept a term life policy since these policies don’t offer cash value. Your cash value access is restricted in an effort to protect the collateral.
3. Your bank will try to be a beneficiary of your death policy, say no. This is a bad idea because let’s say you have paid off half of your loan and you have the bank as your primary beneficiary, and you pass away, the bank would get all of your death benefit.
4. When you begin the application for your life insurance policy you will also be given the collateral assignment form to sign at the same time. A request for the collateral assignment can be done within 24 to 48 hours.
5. The lenders that would accept a term life policy are those who only require the loan for a certain period of time that coincides with the term of the loan.
6. You can also choose to buy a permanent life insurance policy with a specific cash value that will allow the lender to access that amount in order to repay the loan if you were to default.
7. It is very important to buy coverage from a company who offers the opportunity of using their policy as a collateral assignment otherwise your just buying a life insurance policy for the fun of it. Many of them do have specific requirements and they need to be followed for the collateral assignment of life insurance policy can take place.
8. Do you need a policy right away? If so, you should consider a no medical exam policy. A no medical exam policy will help you get a policy quick because it doesn’t require a medical exam. Traditional policies with a medical exam can make the policy take 4-8 weeks or more. With a no medical exam policy you can get approved within 24-48 hours!

Collateral Assignment of Life Insurance Explained

Did you know your life insurance policy can help you obtain a loan? Many lenders accept life insurance as collateral because of the guaranteed funds. Basically, they accept life insurance as collateral because if the insured passes away the lenders would still be getting their money back. In many cases, people have appointed their primary beneficiary to be the lender but we will explain below why you shouldn’t do this. However, you are free to assign your life insurance policy, granted there isn’t any kind of limitation in your contract that would prevent it. If you wanted to you could assign the same policy to multiple banks to secure more than one loan. In other words, you can assign one portion of it to one bank and another portion to another bank. If you wanted to do this then you can do so by transferring the rights to all of or a portion of the policy’s proceeds to an assignee.

When looking to get a collateral assignment in order to get approved for a loan keep in mind that a life insurance policy is conditional. Meaning that most banks require their clients to obtain life insurance in the case of death as sort of a security of their money being returned. Some collateral assignments involve the cash value of existing permanent life insurance policies. Since they look for cash value some lenders won’t accept a term life policy since these policies don’t offer cash value. Your cash value access is restricted in an effort to protect the collateral. If you pay off your loan before your death then the lender would no longer receive any portion of your death benefit.

A Simple Example

For example, Johnny was looking to get a loan of $250,000 to start his home business but when he went to lenders they denied him because of his credit. His dreams and hopes were at stake here until he found out he could get the loan with a collateral assignment of a life insurance policy. So he then decides he is going to buy a life insurance policy of $250,000. Two years later, his business kicks off quite well and he has paid $200,000 of the loan off already but one day he got into a car accident and sadly lost his life. Since Johnny has paid off $200,000 of his loan, Johnny only owed $50,000 so the bank takes out $50,000 of his policy’s death benefit and the rest of the benefit gets sent to Johnny’s beneficiaries.

Don’t Assign your bank as your beneficiary!

Your bank will try to be a beneficiary of your death policy, say no. This is a bad idea because let’s say you have paid off half of your loan and you have the bank as your primary beneficiary, and you pass away, the bank would get all of your death benefit. This is unnecessary because you don’t need to do that, there is a document you can fill out which we will go over below that you don’t need to have the bank as your primary beneficiary.

Types of Life Insurance Policies that Work for a Collateral Assignment

We mentioned before many lenders don’t accept a term life policy as collateral because of the fact that it doesn’t build cash value but there are lenders who do accept term life policies. The lenders that would accept a term life policy are those who only require the loan for a certain period of time that coincides with the term of the loan. For example, if the lender tells you that you only need collateral life insurance for 7 years by that time you are required to pay in full, then a 10-year term life policy would best fit your situation, plus it is the most inexpensive option as far as life insurance policies go.

You can also choose to buy a permanent life insurance policy with a specific cash value that will allow the lender to access that amount in order to repay the loan if you were to default. Like we mentioned earlier, your cash value would be restricted in this case but as long as you pay your loan off before you pass away, your assignment would be removed and the lender would no longer have access to your death benefit.

The process of obtaining Collateral Assignment

A collateral assignment consists of a very simple form that will need to be filled out by you and will need to be signed by all other parties who are involved. The parties that would be involved would be the lender, you (the insured), and if the payer is different than the insured then the owner and payer.

When you begin the application for your life insurance policy you will also be given the collateral assignment form to sign at the same time. A request for the collateral assignment can be done within 24 to 48 hours. You may need to get the form notarized at the time of the signing more than likely at the bank.

The following are example assignment agreement forms from one of the best companies in the market that you can click to view just so you can get an idea of what they say.

Sample Banner Life Assignment Agreement Form

Sample Sagicor Life Assignment Agreement Form

Sample MetLife Assignment Agreement Form

Finding Insurance Companies that Allow Collateral Assignment

It is very important to buy coverage from a company who offers the opportunity of using their policy as a collateral assignment otherwise your just buying a life insurance policy for the fun of it. Many of them do have specific requirements and they need to be followed for the collateral assignment of life insurance policy can take place. Most of the life insurance companies we work with do allow collateral assignment. There are even companies out there who offer both life insurance and a lender to be able to work together to help you obtain the goal of a collateral assignment of life insurance policy for the purpose of getting a loan.

How to get quick life insurance

In many cases, people need life insurance quick because their lender may require their life insurance policy to be placed in a certain time frame. If you do require a collateral assignment of life insurance, InsureChance can help!

Do you need a policy right away? If so, you should consider a no medical exam policy. A no medical exam policy will help you get a policy quick because it doesn’t require a medical exam. Traditional policies with a medical exam can make the policy take 4-8 weeks or more. With a no medical exam policy you can get approved within 24-48 hours! This is the fastest way to get covered and if you want to find out which companies are the best who offer no medical exam policies.

InsureChance is an independent life insurance agency who works with over 60 top rated companies. We are here with the mission of making life insurance a simple concept. We provide the service of matching you with the perfect company based on your specific needs, health, and your lifestyle. Did we mention we are also a free service? Check out the No Medical Exam Life Insurance quote engine and see for yourself what you could be paying in premiums.

Final Thoughts

In conclusion, getting a loan is not impossible if you have bad credit, you can always consider buying a life insurance policy as collateral. It is not impossible and if you are looking for quick insurance for your loan to come through quicker consider no medical exam policies. Keep in mind that you can use our no medical exam quote engine to have an idea of what your premiums would look like or if you have 30 seconds use our quote engine below to see for yourself how your term life premiums would look like while comparing quotes with different A rated companies. Or you can take advantage of our free service, we can do all the shopping around for you! This way you can spend more time with the ones who really matter the most, your family. We not only will shop around for quotes and find the best company for you but we will also do the whole application process for you without a hassle!

If you have certain medical conditions keep in mind that the quotes you see will not be the same that you will receive depending of course on your medical condition and whether or not your medical condition is being controlled or not. All life insurance companies have their own set of niches, for example, if you have high blood then you want to make sure that you buy coverage from a company whose niche or specialty is diabetes because they will give you the best rate you want. If you buy coverage from a company who specializes in sleep apnea and not diabetes then you will find yourself having to pay more for coverage because they don’t understand your medical condition.

Here at InsureChance, we know all of our 60 top rated company’s and their niches so give us a call today and let us find the best life insurance company for you and your family!

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