Absolute assignment life insurance

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Absolute assignment in life insurance refers to the transfer of ownership rights of a life insurance policy from one party to another. It allows the policyholder to assign the benefits of the policy to a different individual or entity. This article will delve into the concept of absolute assignment in life insurance, its implications, and how it works.

Understanding Absolute Assignment

Definition: Absolute assignment is a legal and financial process that enables the policyholder to transfer the rights and benefits of a life insurance policy to another party. The assignee becomes the new owner of the policy and gains control over its benefits, including the death benefit and any cash value.

Process: To initiate an absolute assignment, the policyholder needs to fill out a formal assignment form provided by the insurance company. This form typically requires the details of the assignee, including their name, address, and relationship to the policyholder. Once the form is completed and submitted, the insurance company reviews and processes the assignment.

Implications: By assigning a life insurance policy, the policyholder relinquishes all rights and control over the policy. The assignee becomes the new owner and has the authority to make changes, such as designating new beneficiaries or borrowing against the policy’s cash value. It is crucial for both parties to understand the implications and consequences of absolute assignment before proceeding.

Reasons for Absolute Assignment

Estate Planning: Absolute assignment can be a useful tool in estate planning. By assigning a life insurance policy to a trust or another individual, the policyholder can ensure that the policy’s benefits are distributed according to their wishes upon their death. This can help avoid potential probate issues and provide a smooth transfer of assets to the intended beneficiaries.

Collateral for Loans: Life insurance policies with cash value can be assigned to a lender as collateral for a loan. This allows the policyholder to leverage the policy’s value without surrendering it entirely. In the event of default on the loan, the lender may have the right to access the policy’s cash value to recover the outstanding debt.

Business Purposes: Absolute assignment is also commonly used in business scenarios. For example, a company may assign a key employee’s life insurance policy to itself to protect against financial losses in the event of the employee’s death. This is often done to cover the costs of finding a replacement or compensating for the loss of the employee’s expertise.

Considerations and Limitations

Irrevocable Assignment: In some cases, absolute assignment may be irrevocable, meaning it cannot be reversed or changed without the consent of the assignee. This is particularly important to note when assigning a policy to a trust or another entity, as it may limit the policyholder’s control over the policy in the future.

Tax Implications: Assigning a life insurance policy may have tax implications, depending on the specific circumstances and jurisdiction. It is advisable to consult with a tax professional or financial advisor to understand the potential tax consequences before proceeding with an absolute assignment.


Absolute assignment in life insurance allows policyholders to transfer the ownership rights and benefits of their policies to another party. It can serve various purposes, including estate planning, collateral for loans, and business protection. However, it is essential to carefully consider the implications and limitations of absolute assignment before making any decisions.


– Investopedia: www.investopedia.com/terms/a/absolute-assignment.asp
– The Balance: www.thebalance.com/absolute-assignment-definition-1969826
– Policygenius: www.policygenius.com/life-insurance/absolute-assignment