Policy Collateral Assignments – Lien On Us For Help!

Every garage-sale aficionado knows that if you have your hand on an item you have a claim on it until you let go. Legal liens work the same way. A lien against a life insurance policy is achieved with a collateral assignment (C/A).

Using life insurance as collateral is a common thing, especially on loans. But proper implementation of a C/A can be tricky.

Some concerns:

• Don’t rely on a beneficiary designation! – The policy-owner can change the beneficiary at any time. A C/A assures that the creditor is first in line before the beneficiaries and cannot be removed without approval.
• Time is of the essence – If the insured dies before the C/A is recorded with the carrier, the policy beneficiary is assigned the death benefit.
• Carrier approval of the forms – Most carriers have boilerplate assignments that must be used.
• Alterations to the forms – Carrier forms are usually overboard in their terms and non-specific to the facts and terms of each case. Changes are often necessary, but require carrier approval.
• Proper dating is critical – A C/A must be dated after the policy is in force. Also, if more that one C/A is filed they must have different dates to determine which would be first in order of payment.
• Release – Once the secured obligation is fulfilled, creditor approval is necessary to remove the C/A. Failure to do so may result in cumbersome legal steps when the death benefit is paid many years later when the creditor may no longer be available!

Save yourself the time and hassle. Bring all your casework involving collateral assignments to us. All will be completed and implemented properly.

Contact Tom Virkler, JD, Director of Advanced Markets, at tom@cpsadvancedmarkets.com or 706-614-3796.

For What It’s Worth – This year an estimated 9,000,000 garage sales will be held in the United States.There is a one-in-nine chance you will host one of them, selling items for an average of 85 cents.