An assignment is defined as the transfer of the owner's right to a property, in whole or in part, to another person. The person who does so is called an assignor while the person assigned to, is called as assignee. Assignment also refers to a written document that is used to affect a transfer of rights.
In general, a policyholder assigns his rights to his insurance policy for one of three purposes. The first is to give it is a gift, second is to sell it and the third is to assign it as a security to a loan. Giving the policy as a gift or selling it is called an absolute assignment while doing it as collateral for a loan is called a collateral assignment. An absolute assignment is a permanent transfer of rights to a policy while in a collateral assignment is the transfer is only temporary and the policy owner will reacquire all his inherent policy rights upon payment of the loan.
The insurance company plays an important role in policy assignments. They are the ones who draft policies with assignment clauses that govern the process by which it is done that binds the insurer to the transfer. Even if no such clause is included in the contract, the insured must still inform the insurer of the assignment. Failure to do so may excuse the insurance company from doing its part in the assignment.
For a valid assignment to happen, there are certain requirements that need to be satisfied. One is its compliance with the terms of the policy. Non compliance will not bind the insurer to the assignment. Another is that the assignor must have legal capacity. If he is a minor, the assignment is voidable unless there is a statute that says otherwise. Lack of mental capacity will also invalidate the assignment. It does not have to be in writing but written assignments are desirable and customary. It does not have to follow any legal format but it must clearly identify the policy involved and the assignor's intent to transfer it to the assignee. For a collateral assignment, the rights assigned and the duties of the parties must be clearly spelled out. It must also contain the signature of the assignor and of any irrevocable beneficiary.
Other forms of insurance policy transfer are done through intestate succession, by which the insured dies without leaving behind any will. Local laws determine the person who will inherit the said properties; through a will; through property settlement agreements and divorce decrees, which can operate to alter the policy owner's rights in the policy; through sale of assets elicit the transfer of any insurance policies that the business owns; and by equitable assignment.
An equitable assignment is enforceable in an equitable action if it is required for the sake of fairness but it is not enforceable in court since it does not meet the conditions set forth for a legal assignment.
In general, a policyholder assigns his rights to his insurance policy for one of three purposes. The first is to give it is a gift, second is to sell it and the third is to assign it as a security to a loan. Giving the policy as a gift or selling it is called an absolute assignment while doing it as collateral for a loan is called a collateral assignment. An absolute assignment is a permanent transfer of rights to a policy while in a collateral assignment is the transfer is only temporary and the policy owner will reacquire all his inherent policy rights upon payment of the loan.
The insurance company plays an important role in policy assignments. They are the ones who draft policies with assignment clauses that govern the process by which it is done that binds the insurer to the transfer. Even if no such clause is included in the contract, the insured must still inform the insurer of the assignment. Failure to do so may excuse the insurance company from doing its part in the assignment.
For a valid assignment to happen, there are certain requirements that need to be satisfied. One is its compliance with the terms of the policy. Non compliance will not bind the insurer to the assignment. Another is that the assignor must have legal capacity. If he is a minor, the assignment is voidable unless there is a statute that says otherwise. Lack of mental capacity will also invalidate the assignment. It does not have to be in writing but written assignments are desirable and customary. It does not have to follow any legal format but it must clearly identify the policy involved and the assignor's intent to transfer it to the assignee. For a collateral assignment, the rights assigned and the duties of the parties must be clearly spelled out. It must also contain the signature of the assignor and of any irrevocable beneficiary.
Other forms of insurance policy transfer are done through intestate succession, by which the insured dies without leaving behind any will. Local laws determine the person who will inherit the said properties; through a will; through property settlement agreements and divorce decrees, which can operate to alter the policy owner's rights in the policy; through sale of assets elicit the transfer of any insurance policies that the business owns; and by equitable assignment.
An equitable assignment is enforceable in an equitable action if it is required for the sake of fairness but it is not enforceable in court since it does not meet the conditions set forth for a legal assignment.
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