Final answer:
The transfer of a legal right or interest in an insurance policy is called an assignment. This process allows for benefits or obligations of an insurance policy to be transferred to another party, though the original policyholder's responsibilities usually persist unless the insurer agrees to the transfer.
Step-by-step explanation:
The transfer of legal right or interest in an insurance policy is known as an assignment. An assignment involves transferring the benefits or obligations of an insurance policy from the assignor (the original policyholder) to the assignee (the person to whom the rights are transferred). It is important to note that while the rights and benefits can be transferred, the responsibilities of the policyholder typically remain with the original policyholder unless the insurer expressly agrees to the transfer of obligations.
Examples of situations where an insurance policy might be assigned include selling a car and transferring the associated insurance policy to the new owner, or in the case of life insurance, assigning the policy to a lending institution as collateral for a loan.