Absolute assignment

Absolute Assignment stands for a complete transfer of all the rights of the policy from the assignor to the assignee without any further applicable conditions.

Features of absolute assignmen

Certain basic features of an absolute assignment can be listed:

• First of all, it does not require any special reasons for the assignment to take place.
• Secondly, there are no conditions that must be fulfilled.
• Thirdly, it can be performed in favour of any person or an private entity.

Every reason for the assignment is proper. Furthermore, the assignor is not entitled to any rights to the policy after assignment. Any rights and benefits from the policy may be exercised only by the assignee. The term of absolute assignment usually belongs to the insurance industry. It means an irrevocable transfer of all the owned interests, rights and ownership related to an insurance policy both in the present and future. One of the most common uses of absolute assignment is during life settlement concerning life insurance policy when a person sells his or her policy before their death .

Parties involved

There are a few parties involved in the absolute assignment of an insurance policy. Each function of each party should be well understood. The first party means the insured, the person who is protected by the insurance policy. If we talk about life insurance policy, this person would be the one whose life is insured. The assignor, on the other hand, is the person who at the moment owns the rights the policy is anticipating. The assignee, in turn, is the person who will benefit from the rights. Additionally to the people directly involved in the transaction of an absolute assignment, there are persons who are involved in an indirect manner. First of all, it is the primary beneficiary. The primary beneficiary means the person who benefits from policy's paying off. Additionally to the primary beneficiary there can be also a secondary beneficiary who will benefit from the insurance if for any reason the primary beneficiary is not anymore entitled to the benefits. One of the primary rights to which the assignee is entitled is the right to choose beneficiaries .

Reasons for setting up policies

There is a number of reasons why a person may wish to assign their ownership rights to an insurance policy.

• Business policies are sometimes assigned when the business is simply sold.
• Life insurance policies may be assigned when a person is close death but needs the fund to cover medical costs.
• Accident insurance policies may be assigned to pay up the costs related to the accident.

The term absolute is also very interesting. It means that once the rights are assigned, the decision concerning them cannot be changed. In other words, absolute Assignment means a full Transfer of Rights. The person transferring the rights is referred to as the Assignor, while the person to whom the rights are transferred is referred to as the Assignee. Thus, we can say that Absolute Assignment can be defined as a complete transfer of all and sole rights arising out of the policy from the Assignor to the benefit of the Assignee without any further applicable terms or conditions .

Policy approval process

The assignment process is done when a genuine Policy Document is endorsed or a new Policy Document is issued to the benefit the Assignee. We can discuss it on a simple example:

• Your grandmother owns a life insurance policy of the value of PLN 5 000. She wishes to donate it, as a gift to you.

In that case, she would perform Absolute Assignment of the policy to your benefit, so that the death or maturity proceeds are paid directly to you. Other members of your and your grandmother's family or nominees do not have any right on the policy money. After the assignment is completed, you become the sole and absolute owner of the policy. Thus this kind of Assignment without any further clauses, which are attached to it is defined as the Absolute Assignment .

Example

Examples of Absolute Assignment in real life are numerous, especially in the event of an Insurance Policy, which is taken by an employer as a perquisite for an employee. Once the policy is obtained, it is transferred to the name of the employee on the basis of an Absolute Assignment clause. This way the employee becomes the policy owner, however, it is the employer who pays for it until the end. Hence, instead of receiving cash, the employee is being presented with an insurance policy in his or her name, which is added to their Annual Income Package.

Advantages of Absolute assignment

Absolute assignment of a life insurance policy offers several advantages for both assignors and assignees. These advantages include:

• The assignor is relieved from all responsibilities of the policy, including the payment of premiums.
• The assignee can now benefit from the policy, such as from its cash value, death benefits, dividend payments, or any other benefits provided by the policy.
• The assignee can also use the policy as collateral for loan.
• The assignee can also make any changes to the policy, such as changing the beneficiary, without the approval of the assignor.
• The assignee can also enjoy tax benefits associated with the policy.

Limitations of Absolute assignment

An absolute assignment is the complete transfer of all rights of a policy from the assignor to the assignee. However, there are some limitations to this transfer of rights:

• In some cases, a policy may have certain clauses which restrict the rights of the assignee, such as a clause which states that the policy must remain in the assignor's name.
• Absolute assignment may not be possible in certain states or provinces, as the laws governing insurance policies may vary.
• In some cases, the policy may be subject to certain conditions, such as the payment of premiums or the payment of a surrender value. These conditions must be met before the policy can be assigned.
• The assignee may not be able to make any changes to the policy, such as changing the beneficiary or the amount of coverage.
• The assignor may be liable for any unpaid premiums or other obligations associated with the policy, even after the policy has been assigned.
• The assignee may not be able to receive any benefits from the policy until the assignor has been fully compensated for any obligations associated with the policy.

Other approaches related to Absolute assignment

The following are other approaches related to absolute assignment:

• Reassignment: This approach involves the transfer of ownership rights from the assignor to the assignee with the agreement of the insurer.
• Subrogation: This approach involves the transfer of ownership rights from the assignee to the assignor without the agreement of the insurer.
• Collateral Assignment: This approach involves the transfer of ownership rights from the assignor to the assignee but with the agreement of the insurer.
• Endorsement Assignment: This approach involves the transfer of ownership rights from the assignor to the assignee with the agreement of the insurer but with certain restrictions.

All of these approaches involve the transfer of ownership rights from the assignor to the assignee, but with different conditions and agreements with the insurer. In summary, absolute assignment is a complete transfer of all rights of the policy from the assignor to the assignee without any further applicable conditions.

Footnotes

Absolute assignment — recommended articles

Collateral assignment — Vesting order — Mortgage deed — Consent order — Spendthrift clause — Clear title — Certificate of satisfaction — Confession Of Judgment — Fixed and floating charge — Business angel

References

• Jerry II, R.H., Richmond, D.S. (2012). Understanding Insurance Law. LexisNexis.
• Malloy R.P. (2015)., Emanuel Law Outlines for Real Estate, Wolters Kluwer Law & Business
• Sandeen S.K. (2007)., Intellectual Property Deskbook for the Business Lawyer: A Transactions-based Guide to Intellectual Property Law, American Bar Association

Author: Pola Ligaj