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Once the policy is purchased, it is transferred to the employee’s name under Absolute Assignment clause.Hence the employee becomes the owner of the policy, but the employer pays for it till the end.Any money that is left over from the death benefit would be paid to your designated beneficiaries.
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When you purchase life insurance, you typically do so to prepare for after your death.
However, an insurance policy is an owned entity and, as such, can be sold or used as collateral for a loan in order to provide cash value to someone in need.
If the insured dies before the debt is repaid, the balance of the debt is paid to the creditor out of the policy proceeds.
If there are any funds left once the debt has been satisfied, the rest of the proceeds go to the policy's beneficiary.If an absolute assignment was made, the company will pay the entire proceeds to the assignee.If a collateral assignment was made, the company will usually make the check payable jointly to the assignee and the beneficiary.Thus, in that case, he would like to perform Absolute Assignment of the policy in Ajay’s name such that the death or maturity proceeds are directly paid to him.Rahul’s family members or nominee does not have any right on the policy money.As long as the beneficiary was not designated as an irrevocable, the assignee can even change the beneficiary without the beneficiary's permission.If the policy is transferred as a means of establishing security on a debt, it is considered a collateral assignment.Because life insurance benefits are fully assignable, you could assign them to anyone, including a business.Using Absolute Assignment in a Loan Agreement If you have a life insurance policy, you could assign the policy over to a lender as collateral for a loan.The transfer of ownership is referred to as assignment and the new owner is the assignee.If the policy is transferred under an absolute assignment, the transfer is irrevocable and the assignee receives full control of the policy.