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An assignment is the transfer of ownership rights in a piece of property to another. The person or entity transferring the right is the assignor; the party receiving the right is the assignee.(1) An assignment may be absolute, partial or collateral.
An absolute assignment is a transfer to the assignee, by sale or gift, of all of the assignor's rights in the property. In this context, "absolute" means that all rights are unconditionally transferred.
A partial assignment means that the transferor parts with some of his or her rights but retains one or more of the rights he or she possesses in the subject property.
A collateral assignment is a transfer of some or all of a person's interests in property as security for a loan. The interest acquired by the creditor in a collateral assignment terminates when the loan is repaid. This fact should be reflected in the document which asserts the security interest of the collateral assignee.
Life insurance contracts are a form of property which are frequently the subject of absolute and partial assignments. Because of the great disparity between the low annual premium and the much larger death benefit, the life insurance contract permits the assignor to transfer a large value at a small cost. Like other forms of property, life insurance contracts are also often assigned as collateral.(2)
The right to assign property is fundamental to our law and is presumed to exist; although parties to a contract may agree to provisions that restrict the right to assign any property subject to the contract. The typical life insurance contract contains a clause which defines the policyowner's right to assign the policy. Such a clause is not required in order for the right to exist, but such clauses permit the insurance company to describe the conditions under which that right to assign must be exercised.
A life insurance contract assignment provision might contain language such as the following:
You (the policyowner) may assign this policy as collateral security, subject to policy loans. Your interest in this policy may be assigned without the consent...