Collateral Assignment of Life Insurance Policy Proceeds

by Jeff Rose on March 8, 2017 · 10 comments

in Term Life Insurance

collateral assignment of life insuranceAre you looking for a way to secure a loan, but do not have the credit rating or typical collateral in order to do so?

Then you might want to consider the assignment of life insurance policy as collateral for a loan.

This relatively new field in the obtainment of loans uses your own life insurance policy as the means for you to obtain the type of loan you want.

The collateral assignment of life insurance policy proceeds is a relatively simple one, but there are a few steps that need to be taken before you can take full advantage of this method.

Please note: You first must find a lender that will be willing to accept your life insurance as collateral. We do not do that. If you identify a lender that will, we can assist you in purchasing the most the affordable life insurance policy and completing the collateral assignment paperwork.

Finding Insurance Companies That Allows Collateral Assignment

The first question before the assignment of life insurance policy as collateral for loan can be processed is whether your life insurance company will allow it to happen. Many of them do have specific requirements and they need to be followed for the collateral assignment of life insurance policy can take place.

If the answer is no, at least you can eliminate that method to obtaining your loan and in the future obtain a life insurance policy that will not have these restrictions.

Most of the insurance carriers that we work with do allow for collateral assignment of your policy so as long as you identify a lender that will accept it.

There are companies out there that specialize in working with both lenders and life insurance companies that can help you obtain the goal of collateral assignment of life insurance policy for the purposes of getting a loan. In most cases, they follow a step-by-step approach that starts with contacting the lender to see what type of life insurance qualifies as collateral. The company will insure getting the exact wording necessary so that the next step can be taken.

collateral assignment form sample

Now you apply for the life insurance that qualifies for the loan, in some cases it may not need a medical exam which generally is more expensive but can be done in a few days or it may require an exam and be fully underwritten which is less expensive, but takes a few weeks. If you currently have a policy that qualifies for assignment of life insurance policy as collateral for loan, then this step can be avoided.

If you are in need of a quick option and are in overall good health, there are guaranteed acceptance insurance policies and simplified issued policies that require little to no medical exams and are issued rather quick.

Lender Accepting The Insurance Policy Proceeds As Collateral

The lender will now accept the life insurance as collateral for your loan, usually they are consulted beforehand to insure that all the wording and legal language requirements are met and that the application is essentially approved before it is sent in to avoid any unwanted surprises.

Once it is approved, then the forms are signed by both the lender and the life insurance company so that the process can take the final step of providing you with the loan that you need.

Sample Collateral Assignment Form

collateral assignment life insurance policy sample form

This rather straightforward process can be quite technical in nature and needs an experienced, knowledgeable company to make the transaction work so that you can get the loan you desire while satisfying the needs of both the lender and the life insurance company. This way, all the potential problems are ironed out beforehand and you get the loan you want.

If you are looking for another method to obtaining a loan, then using your life insurance policy proceeds or having one drawn up can be the way to get what you need.

Collateral Assignment Example

We recently had a client that was a real estate developer and needed to secure a $4 million term life policy to cover his bank loans. He was needing to get his life insurance fast, so we went with the carrier we felt would issue the quickest based on his situation.

Within 4 weeks the policy was in-force and he was completing the collateral assignment forms to hand over to his banks. Keep in mind that the assignment forms do not need to be completed until after you receive your policy from the insurance company.

Sample form: Collateral Assignment

Life Insurance For Your Family

The idea of using a life insurance policy as collateral is a relatively no idea. These plans are an excellent way to secure a loan that you wouldn’t be able to get otherwise. One thing to always be aware of is the life insurance protection that you’re giving your loved ones. Life insurance plans are a great way to close a loan, but the primary use for any life insurance policy should be to give your family members the money that they need if something tragic were to happen to you.

Thankfully, there are plenty of affordable life insurance policies that you can choose from, both for loan purposes or for protection for your family. If you’re looking to get the most affordable insurance policy, your best bet is going to be a term life insurance plan. As you probably know, these plans are bought with a pre-determined expiration date attached to them. After that date has passed, you’ll have to reapply for coverage. Because they aren’t a permanent form of coverage, they are going to be much more affordable than other options for life insurance.

Additionally, there are a few things that you can do to help secure the lowest premiums available. Before the insurance company approves your application, they are going to require that you complete a medical exam. The medical exam will give them an idea of what your overall health is and how much risk you are to insure with a life insurance plan. The better results that you get from the medical exam, the lower that your insurance rates are going to be.

If you want to save money on your insurance premiums, you’ll need to start getting regular exercise and stick to a healthy diet. Both of these can help you lose any extra weight, lower your cholesterol, and reduce your risk of having severe health complications later in life. It’s time to dust off your old tennis shoes and start hitting the gym. Your doctor and your wallet will both thank you.

Another way that you can get the lowest insurance rates is to eliminate any tobacco that you currently use. If you’re a smoker, you can expect to pay much higher rates on your premiums. In fact, smokers are going to pay twice as much for life insurance versus what a non-smoker is going to pay for the same amount of life insurance protection. If you want to get the most affordable plan, either for a loan or for traditional reasons, you’ll need to kick the bad habit once and for all.

If you have any questions about life insurance as collateral or about getting the most affordable coverage, please contact me today. I would be happy to answer those questions and ensure that you’re getting the best policy to meet your needs. Don’t wait any longer to get the life insurance protection that your loved ones need.

{ 10 comments… read them below or add one }

Sheryl October 19, 2012 at 7:30 pm

I have a policy that offers this option however no banks seem to accept. do you have any that you can refer?


Jeff Rose November 15, 2012 at 7:47 pm

@ Sheryl That’s strange. We’ve issued tons of policies and getting collateral assignment has never been an issue. Who is your policy with?


Herbert McCormack October 27, 2012 at 11:56 pm

Do you know of lenders who accept life insurance policies as collateral for a loan. I retired from the U.S.Postal Service with a life insurance policy worth over 200k. Instead of leaving it to charity, I would like to use it as a means to assign it for a loan. I have already verified with the Office of Personnel Management in Washington that it is allowed. I have no family, therefore I would be interested in using it as collateral or to sell part of the policy. The premiums are taken out of my annuity every month which is relatively inexpensive compared to the payout. The polivy includes a basic amount equal to my last year of salary plus five times that amount as a optional multiple.


Jeff Rose November 15, 2012 at 7:46 pm

@ Herbert Contact our office and we can talk about some of your options.


Meix Teurn November 16, 2012 at 5:33 am

I already have a cash value life insurance and would like to see if I can use it as a collateral to obtain a loan. Please let me how I can go about doing it. I am also interested in getting another policy.



Jeff Rose November 16, 2012 at 5:14 pm

@ Meix Teurn The answer is yes. The bank is not going to look at the cash value of the policy, they are concerned with the death benefit of the policy.


J. Benjamin January 10, 2013 at 2:27 am

I am trying to find a lender for my insurance to be used as a collateral assignment – may I contact you?


Jeff Rose April 8, 2013 at 2:09 pm

@J. We unfortunately don’t have any lender contacts. Most of our clients already have relationships with existing lenders before they contact us regarding collateral assignment.


Lisa June 8, 2013 at 12:25 am

Does New York Life allow their whole life insurance policies to be used as collateral?


Jeff Rose June 8, 2013 at 4:52 am

@ Lisa You would have to double check with them, but doubtful. You would probably be only to borrow off the cash value if there was any.


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