Question

All of the following are examples of third-party ownership of a life insurance policy EXCEPT

A When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to
the mortgage company.
B An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to
secure the loan.
An insured couple purchases a life insurance policy insuring the life of their grandson.
A company purchases a life insurance policy on their manager, who is an important part of the operation.

Answer 1

Answer: B. An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.

Step-by-step explanation:

A collateral assignment allows a person to use their life insurance policy as collateral when taking out a loan. It is therefore based on a life insurance policy ownership, but isn't one itself.

It works by allowing the creditor to be able to get back whatever is owed to them when the debtor dies by claiming it from the proceeds of the debtor's life insurance policy.